Portfolio managers sold the equivalent of 9 million barrels in the six most important contracts in the seven days to Nov. 9, according to records from ICE Futures Europe and the U.S. Commodity Futures Trading Commission.
Funds have been net sellers in four of the last five weeks, reducing their combined position by a total of 77 million barrels (9%) to 794 million barrels.
But nearly all the adjustment has come from a reduction in previous bullish long positions (-70 million barrels) with only a small number of new bearish ones initiated (+7 million), consistent with profit-taking after a big rally.
In the most recent week, hedge funds were sellers of Brent (-10 million), U.S. gasoline (-5 million) and U.S. diesel (-9 million), but bought NYMEX and ICE WTI (+12 million) and European gas oil (+4 million).
WTI and gas oil have been the strongest elements of the complex in recent months, expected to benefit from continued production restraint by U.S. shale producers and the scarcity of natural gas stocks in Europe.
The hedge fund community remains essentially bullish about the outlook for oil, with combined long positions outnumbering shorts by 6:1, in the 79th percentile for all weeks since 2013.
But with prices already at multi-year highs and positions stretched, petroleum contracts are no longer attracting much fresh buying. Instead they are being sapped by persistent, gentle selling as managers lock in some profits.
John Kemp is a Reuters market analyst. The views expressed are his own.