Column: Oil purchases accelerate amid growing confidence in economic recovery
Hedge funds strengthened their position in oil for the fourth week in a row, as the uptrend in consumption and oil prices rebounded from the March setback.
Hedge funds and other fund managers bought the equivalent of 40 million barrels in the six largest oil futures and options in the week to May 4.
The portfolio managers have bought 102 million barrels in the past four weeks, canceling sales of 113 million barrels between mid-March and early April (https://tmsnrt.rs/3y3qUMS).
During the last week there have been purchases across the complex, led by NYMEX and ICE WTI (+14 million barrels) and Brent (+11 million) but also European diesel (+7 million) , American gasoline (+6 million) and the United States. diesel (+1 million).
Long positions outnumber shorts by a nearly 6: 1 ratio, almost back to the previous high in mid-February, and the 80th percentile for all weeks since the start of 2013, implying a wide consensus that prices are going even higher.
The buying rate of hedge funds is accelerating and widening to include both crude and refined fuels, reflecting growing confidence in an economic recovery and a cyclical recovery in oil consumption.
Rising coronavirus infections in India and a late recovery in passenger aviation are no longer deterring oil bulls, with buyers predicting consumption will nonetheless increase later in the year.
In recent weeks, the number of oil rigs in the United States has also stabilized, implying a slower increase in shale production in the second half of the year, helping to support prices at a higher level.
– US oil stocks normalize after pandemic outbreak (Reuters, May 6) Read more
– Fund oil purchases pick up as global manufacturing surges (Reuters, May 4) Read more
– Inflation-tolerant Fed to raise commodity prices (Reuters, April 30) read more
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