July 16, 2018, by John Kemp
LONDON (Reuters) – Hedge fund managers made few adjustments to their positions in the petroleum complex in the week ending on July 10, as the market remained calm – before oil prices plunged the following day.
Hedge funds and other money managers raised their net long position in the six most important futures and options contracts linked to petroleum prices by just 6 million barrels in the seven days to July 10.
Net length increased for the third week running but the rise was much smaller than in the week ending July 3 (+47 million barrels) or June 26 (+36 million) indicating the recent wave of position-building was largely complete.
Portfolio managers cut net long positions in Brent (-10 million barrels) while adding them in NYMEX and ICE WTI (+1 million), U.S. gasoline (+6 million), U.S. heating oil (+5 million) and European gasoil (+4 million).
The previous position-building in WTI ran out of steam, with fund managers adding just 1 million barrels of net long positions, compared with 41 million and 75 million in the two prior weeks.
While crude contracts continued to come under selling pressure, funds started or continued to add slightly to bullish positions in refined fuels (tmsnrt.rs/2KZZ67a).
Net length in European gasoil increased for the first time in seven weeks, while U.S. heating oil and gasoline both saw bullish positions rise for the second week running.
The very limited position changes in the week to July 10 suggest most fund managers had completed adjusting their positions after a bout of profit-taking on crude and fuels that began in late April.
But Brent positions have declined in 10 out of the last 13 weeks, and with no new buying in WTI, the gentle downward pressure on prices and calendar spreads finally turned into a torrent just one day later.
— John Kemp is a Reuters market analyst. The views expressed are his own —
Editing by Toby Chopra