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Column: Funds buy crude on expected delay to OPEC+ output increase

LONDON (Reuters) - Hedge funds purchased crude futures and options at the fastest rate for six months as portfolio managers became increasingly confident OPEC+ will postpone scheduled output increases until demand is stronger.

Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base

The equivalent of 55 million barrels was purchased by hedge funds and other money managers in the six most important petroleum futures and options contracts in the week to Oct. 22.

Buying was concentrated in NYMEX and ICE WTI (+36 million barrels) and Brent (+20 million), with only minor adjustments in U.S. diesel (+2 million) and European gasoil (-4 million) and no change in U.S. gasoline.

In crude, fund managers continued to buy back previous bearish short positions (+22 million barrels), as in previous weeks, but also started to establish new bullish long positions (+34 million).

The net position in crude has increased over the two most recent weeks to 464 million barrels, up from a low of 380 million on Oct. 6.


The net position is now in the 44th percentile for all weeks since the start of 2010, up from the 26th percentile on Oct. 6.

Rising net length is consistent with an increasing conviction that Saudi Arabia, Russia and other countries in the OPEC+ group will agree to postpone planned output increases when they meet at the end of November.

OPEC+ is scheduled to increase production by almost 2 million barrels per day from January, but that will now probably be pushed back until April because of concerns over a slower than expected recovery in oil consumption.

John Kemp is a Reuters market analyst. The views expressed are his own.

Related columns:

- Hedge funds see OPEC+ offsetting recession risk (Reuters, Oct. 21)

- Shrinking U.S. oil stocks point to market rebalancing (Reuters, Oct. 8)

- Hedge funds resume oil sales (Reuters, Oct. 5)

- Hedge funds race to cover crude short positions (Reuters, Sept. 28)

Editing by David Goodman