For all the bullish chatter, hedge fund managers have become cautious about increasing their exposure to crude oil, though they are becoming increasingly optimistic about the outlook for refined fuels again.
Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum by six million barrels in the week to April 24.
Net length was reduced in NYMEX and ICE WTI (-17 million barrels), Brent (-7 million) and European gasoil (-2 million) but increased in U.S. heating oil (+7 million) and especially U.S. gasoline (+13 million).
Portfolio managers have not really increased their net long position in WTI and Brent since the start of April and arguably not since the start of February, which is perhaps a sign they are now fully invested.
In contrast, fund managers have been adding net long positions in gasoline and heating oil, after cutting them in February and March, according to position records published by regulators and exchanges.
By April 24, funds held a record net long position in U.S. gasoline equivalent to 111 million barrels as well as a net position in heating oil equivalent to 69 million barrels (https://tmsnrt.rs/2JEyL9A).
Hedge fund managers have amassed a near-record position of 1.405 billion barrels in petroleum and show no signs of rushing to take profits despite the rise in prices to their highest level since 2014.
But if there has been no liquidation, there has also been no further buying, except for refined fuels, and overall there has been no upward buying momentum in the petroleum complex for over two months.
For the time being, most funds have already put on their positions, and are now waiting to see if the fundamentals will validate their bullish expectations.
By John Kemp