Hedge funds continued to boost their bullish position in crude and fuels last week despite a call from U.S. President Donald Trump for OPEC to "relax and take it easy".
Hedge funds and other money managers were net buyers of an extra 16 million barrels of Brent crude futures and options in the week to Feb. 26, according to ICE Futures Europe.
Fund managers have been net buyers of 155 million barrels of Brent futures and options since Dec. 4, increasing their net long position in 11 out of the last 12 weeks (https://tmsnrt.rs/2EJUvB4).
Funds were net buyers in the week to Feb. 26 despite the president's intervention a day earlier, which strongly suggests buying was even higher before his message on Twitter.
Portfolio managers seem increasingly convinced the United States and China will reach a trade deal and the global economy will avoid a prolonged and deep slowdown.
At the same time, production cuts by Saudi Arabia as well as U.S. sanctions on Iran and Venezuela are expected to curb the growth in oil production in 2019/2020.
Fund managers now hold more than six bullish long positions for every bearish short one, up from a ratio of 2:1 in early December, and the most bullish ratio for four months.
Hedge funds were also net buyers of almost 13 million barrels of European gasoil futures and options in the week to Feb. 26, taking their net long position to 64 million barrels.
Funds have bought gasoil futures and options in each of the last eight weeks and have purchased a total of 61 million barrels since the start of the year.
Gasoil positioning is now strongly bullish, with long positions outnumbering short ones by more than 17:1, up from an equal number of longs and shorts at the turn of the year.
Continued global economic expansion, albeit at a slower pace than in 2018, should underpin further increases in consumption of mid-distillates such as diesel and jet fuel.
Meanwhile the introduction of new bunker fuel regulations at the start of 2020 is expected to boost consumption of diesel and marine gasoil as the expense of heavy fuel oil.
By John Kemp
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