John Kemp

LONDON, (Reuters) – Profit-taking erupted last week after seven-year-highs in and middle distillate prices increased inflation concerns and raised the possibility that central banks might take countermeasures.

Rising oil and commodity prices have been a major problem for policymakers in advanced economies. The U.S. Federal Reserve, along with other central banks, will need to raise interest rates to reduce growth and keep prices under control if the inflation rate for oil and other commodities does not decrease on its own.

In this context, the equivalent to 28,000,000 barrels were sold by hedge funds and money managers in six of the most significant petroleum-related options and futures contracts during the week up to February 8.

Portfolio managers were able to sell petroleum products for the second time within three weeks. The sales are the biggest since last November.

The most recent week saw net sales at NYMEX (NYSE:), ICE (NYSE;) WTI (-9,000,000 barrels), (-7million), U.S. Diesel (-10 million) as well as European gasoline oil (-3million). Only U.S. petrol was unchanged.

After previously increasing by 150,000,000 barrels from the November end, the combined position remains essentially unchanged since mid-January.

The outlook for prices is still good for portfolio managers, who have a combined total of 730,000,000 barrels at the 65th percentile since 2013.

A ratio of 5.6 to 1 means that bullish long positions have outnumbered bearish short positions across all six contracts. This puts them in the 74th per centile.

However, the prices of goods and services have risen more than 30% within three months. Additionally, there is growing concern about rising inflation.

Last week’s bullish position reductions by 14,000,000 barrels were offset by new bearish positions of 14,000,000 barrels. This confirms a more cautious view on future price increases.

Similar columns

– Diesel shortage attracts hedge fund attention (Reuters, Feb. 7)

Reuters Feb. 4: Supply chain pressure is evident in depleted U.S. distillate stock (Reuters, February 4)

Reuters: Some Oil Investors Make Profits Despite a Tight Market (Reuters, January 31).

Reuters: Overheating signs in the oil market (Reuters, January 28).

John Kemp is a Reuters Market Analyst. His views are his alone