LONDON (Reuters) - Hedge funds have increased their exposure to diesel and moved away from gasoline amid fears the lingering epidemic and slow vaccination programmes will depress personal travel and the services sector for many more months.
Hedge funds and other money managers purchased the equivalent of 8 million barrels in the six most important petroleum futures and options contracts in the week to Feb. 2.
But the rate of buying was the slowest for five weeks and before that the beginning of November, when the first successful vaccine trials were announced.
Portfolio managers were small buyers of Brent (+8 million barrels), NYMEX and ICE WTI (+7 million barrels), U.S. low-sulphur diesel (+3 million) and European gas oil (+10 million).
However, they were heavy sellers of U.S. gasoline (-19 million barrels), selling at the fastest rate since last March, when the first wave of the epidemic was spreading unchecked.
Until recently, fund managers had been more bullish on gasoline than on any other element of the petroleum market.
Funds’ gasoline long positions outnumbered shorts by a ratio of more than 9:1 at the start of the year on expectations a rapid deployment of vaccines would lead to a resumption of personal travel and retail services.
Since then, it has become clear vaccination programmes are progressing slowly in many countries, which will delay the resumption of normal travel activity.
Even once a significant proportion of the population has been vaccinated, some movement and business restrictions will likely be maintained for months.
The positioning ratio in gasoline, which seemed most stretched at the start of the year, has since fallen to less than 6:1.
In contrast to the restricted movement of people, the movement of goods has returned to pre-epidemic levels in many countries.
The result is a much stronger recovery in consumption of diesel than gasoline, which is now being reflected in a rotation of fund positions.
John Kemp is a Reuters market analyst. The views expressed are his own.
- Manufacturing and freight drive diesel-led oil recovery (Reuters, Feb. 2)
- Oil prices stall, hedge funds cautious buyers (Reuters, Feb. 1)
- Hedge fund positions in crude, gasoline start to look stretched (Reuters, Jan. 18)
Editing by Mark Potter
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