Hedge fund position-taking in crude and products remains desultory as uncertainty about the future direction of prices and the course of the coronavirus pandemic compounds the normal summer-time trading slowdown.
Hedge funds and other money managers purchased the equivalent of 24 million barrels of futures and options in the six most important oil futures and options contracts in the week ending on July 14.
Purchases reversed sales of 21 million barrels the previous week, extending a slight rise in petroleum positions evident over the last month, after a much stronger upward trend over the previous two months.
Last week’s purchases were concentrated in Brent (+11 million barrels) and European gasoil (+7 million) with smaller buying in NYMEX and ICE WTI (+1 million), U.S. gasoline (+5 million) and U.S. diesel (+1 million).
The European focus may reflect concerns about the resurgence of coronavirus and its potential impact on oil consumption in the United States.
Overall, the hedge fund community is running a neutral position in petroleum, but slightly weighted towards crude rather than fuels (tmsnrt.rs/2WD2poG).
The current net long position across all six contracts (642 million barrels) is exactly in line with the mean over the last seven years (641 million). It lies in the 61st percentile for all weeks since 2013.
Long and short positions across the six contracts are also split in a ratio (4.2:1) close to the mean (4.4:1) for the last seven years.
For the three crude contracts, however, the net position (580 million barrels) is very slightly above average (535 million) and in the 68th percentile.
Portfolio managers seem convinced by the determination of OPEC+ to drain excess crude inventories but worried about the possibility of a recurring epidemic and extended slump in oil consumption, which explains the bias towards crude rather than products.
Coupled with the lack of significant new information about either production or consumption over the last four weeks, stagnant spot prices and calendar spreads, and the onset of the summer holiday period in major trading centres, most fund managers seem content to remain on the sidelines for now.