LONDON (Reuters) - Hedge fund managers have continued to cover short positions in crude oil and gasoline, helping lift prices across the petroleum complex against a backdrop of improving fundamentals.
Hedge funds and other money managers reduced short positions in the five major petroleum futures and options contracts by a further 44 million barrels in the week to July 18 (tmsnrt.rs/2gWa6Ui).
Total short positions in ICE Brent, ICE and NYMEX WTI, NYMEX gasoline, and NYMEX heating oil were cut to 350 million barrels, from a record 510 million barrels three weeks earlier.
The extreme short positioning seen in most contracts at the end of June has gradually dissipated amid signs of a slowdown in shale drilling and a sharp draw in stocks of crude and gasoline in the United States.
Hedge funds raised their combined net long position in Brent and WTI by 66 million barrels to 500 million barrels in the week to July 18 (tmsnrt.rs/2eHF4ii).
Portfolio managers also boosted their net long position in gasoline by nearly 9 million barrels to 15 million barrels, according to regulatory and exchange data (tmsnrt.rs/2eHF9m6).
Short positions in NYMEX WTI are almost back to the same level as at the start of June, when the current short-selling cycle started (tmsnrt.rs/2gWqGnb).
Brent and WTI prices too are almost back to the level when the wave of short-selling began, indicating the current short-selling cycle may be drawing to a close (tmsnrt.rs/2gWtS23).
Some managers have begun to build long positions in anticipation of a further rise in prices, especially in crude, where hedge funds added 29 million barrels of bullish long positions across Brent and WTI.
But with so many short positions now covered, the balance of short-term price risks appears more even than at any time since early June.
“Saudi Arabia curtails crude flow to United States”, Reuters, July 21 [:nL5N1KC2FP]
“U.S. gasoline surplus eliminated by trade flows”, Reuters, July 20
“Twice burned, funds wait for clear sign of oil rebalancing”, Reuters, July 17
Editing by Dale Hudson