Is long crude oil trading getting crowded? Hedge funds become net sellers for the first time in 4 weeks

Golden10 Data ·  10/03 22:35

Source: Golden Ten Data

According to the latest data, as oil prices soar, hedge funds seem to have ended their purchases of crude oil. After buying 155 million barrels of crude oil, they became net sellers, but they are still buying WTI crude oil...

As the benchmark crude oil price climbs to $100 per barrel,Portfolio investors seem to have ended their oil purchases, which has raised concerns about overcrowding and some profit settlements.

In the seven days ending September 26, hedge funds and other fund managers sold the equivalent of 25 million barrels of crude oil in the six most important oil futures and options contracts.

The fund made a net sale of crude oil for the first time in 4 weeks

According to records submitted by ICE Futures Europe and the US Commodity Futures Trading Commission (CFTC),After buying 155 million barrels of crude oil on August 29, fund managers became net sellers for the first time in four weeks.

The fund continues to buy WTI crude oil (an increase of 16 million barrels), reflecting heightened crude oil inventory tension near the Cushing delivery point in Oklahoma.

In the last five weeks, WTI crude oil purchases totaled 152 million barrels, and the net position reached 286 million barrels (this is the 60th percentile for all weeks since 2013).

However, in the last week,The fund's net sales of 22 million barrels of Brent crude oil increased by 63 million barrels in the previous three weeks.

The net position of Brent crude oil is 244 million barrels, which is close to the long-term average of 232 million barrels.This shows that there is a high degree of uncertainty about the next trend in oil prices.

On the product side, fund managers are important sellers of US gasoline (13 million barrels less) and European gasoline (7 million barrels less), and small purchases of US diesel (2 million barrels more) only partially offset this impact.

Overall,The rapid depletion of Cushing's crude oil inventories is still attracting hedge funds to open long positions in order to profit from inventory tightening.

Funds are also optimistic about US diesel, because its inventory is still far below the seasonal average for the past 10 years, and has not recovered during the summer gasoline production period.

But for other products,Investors are becoming more cautious, because prices are already above the inflation-adjusted long-term average, and continued inflation will worsen the economic outlook.

US gas is being bearish by hedge funds

Investors are increasingly bearish on the outlook for US gas prices, even as the large inventory surpluses inherited from 2022 are gradually being exhausted.

Hedge funds sold futures and options contracts equivalent to 380 billion cubic feet of the two most important natural gas. These contracts are linked to the benchmark for US gas futures prices.

On September 26th,The net short position held by the fund was 273 billion cubic feet(This is the 24th percentile for all weeks since 2010), below the net long position of 743 billion cubic feet (48th percentile) on July 11.

On September 22, the inventory surplus was only 75 billion cubic feet higher than the seasonal average for the past 10 years, and lower than the surplus of 299 billion cubic feet on June 30.

However, the mid-term forecast from the US Climate Prediction Center shows that for the whole of October, temperatures in almost the entire US are likely to be above average. Further speaking,The strong El Niño phenomenon in the Pacific region is likely to reduce heating demand and natural gas consumption during the peak winter season from December to February next year below average.

The outlook for winter temperatures above average and gas consumption below average for 2023/24Hedge funds are bearish on US gas.


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