Column-Hedge fund oil positions caught between risks from sanctions and recession: Kemp -Breaking
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© Reuters. FILE PHOTO – A view from an oil refinery on the Singapore coast, March 14, 2008. REUTERS/Vivekprakash John Kemp
LONDON, (Reuters) – Investors in crude oil and refined products remained steady last week after strong sales the previous two weeks. Fund managers attempted to offset risks of sanctions against Russia and a possible global recession.
Hedge funds and other money managers purchased the equivalent of 16 million barrels in the six most important petroleum-related futures and options contracts in the week to March 22 (https://tmsnrt.rs/3LCWUxl).
According to ICE Futures Europe position records and the U.S. Commodity Futures Trading Commission, 178 million barrels were sold by managers in the previous two weeks.
The last week was marked by small purchases, including (+8,000,000 barrels), NYMEX (+5million), U.S. gasoline (+3million) as well as European gas oil (+3million). This was partially offset in part by U.S. Diesel sales (-3million).
Portfolio managers must balance the risks of disruptions to Russian crude oil, heavy fuel oil, and diesel exports and global demand threats from possible economic recessions and lockdowns.
The crude oil side saw bullish long positions outnumber bearish short ones in a ratio just 4.65 to 1, which is very close the the long-run average, and the 52nd percentile of all the weeks since 2013.
The 78th percentile had a 5.16 to 1 ratio for middle distillates, indicating the severe shortage of gasoline and diesel oil.
It is becoming more difficult to keep existing positions, or start new ones due to the high volatility of futures prices.
The total number of open futures positions across all six contracts for all traders fell by 85 million barrels to 5.188 billion last week, the lowest since June 2015, and down from 6.200 billion before Russia’s invasion of Ukraine.
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John Kemp works as a Reuters analyst. His views are his alone
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