London — Hedge funds continue to bet on a recovery in oil prices, but their bullishness is concentrated on crude, especially U.S. crude, while refined fuel markets are expected to take longer to tighten.
Hedge funds and other money managers purchased the equivalent of 26 million barrels of futures and options in the six most important contracts in the week ending on May 26.
Portfolio managers have been buyers in eight of the last nine weeks, purchasing a total of 318 million barrels, having previously sold 688 million barrels since the start of the year.
Purchases were once again concentrated in crude (+28 million barrels) but last week with a fairly even split between NYMEX and ICE WTI (+14 million) and ICE Brent (+15 million).
Funds have purchased a total of 230 million barrels of WTI in the last nine weeks and just 116 million barrels of Brent.
As a result, funds hold more than 7.5 bullish long positions for every short position in WTI, compared with a ratio of less than 4:1 in Brent.
Continuing the pattern of recent weeks, there were no significant position changes last week in U.S. gasoline (-1 million barrels), U.S. diesel (-4 million) or European gasoil (+3 million).
Fund managers show little directional enthusiasm for refined fuels, with long/short ratios of just 3:1 in gasoline and 1:1 in mid-distillates such as diesel and gasoil, both of which are relatively low.
Investors expect the oversupply in crude to disappear first, as OPEC+ cuts output hard, with shale cuts providing extra support for WTI, while consumption takes longer to recover, clearing the surplus of refined fuels later.
Follow us on twitter
- John Kemp, Reuters