Investors Bet Against OPEC+ Raising Oil Prices

By John Kemp
Tuesday, November 28, 2023

Investors are increasingly pessimistic about the outlook for crude oil prices as doubts grow OPEC+ will cut production enough to offset rising non-OPEC output and a deteriorating economic outlook.

But many professional money managers are more optimistic about refined fuel prices, especially U.S. gasoline and diesel, expecting low inventories will ensure prices remain stronger than crude.

Hedge funds and other money managers sold the equivalent of just 3 million barrels in the six most important petroleum futures and options contracts over the seven days ending on Nov. 21.

Crude sales (-25 million barrels) including Brent (-16 million) and NYMEX and ICE WTI (-9 million) were offset by purchases of fuels (+21 million) including U.S. gasoline (+13 million) and European gas oil (+10 million).

The combined position in crude had been reduced to just 225 million barrels, which was in the lowest percentile and within 20 million barrels of the record low in a time series that goes back to 2013.

The position in NYMEX and ICE WTI was especially low at just 70 million barrels (2nd percentile for all weeks since 2013) as U.S. oil production continues to climb.

Fund managers had sold WTI for eight weeks, reducing their position by a total of 216 million barrels since the end of September.

In consequence, funds have become almost as bearish on crude as they were at the end of June before Saudi Arabia and its OPEC+ partners implemented additional production cuts.

By contrast, the position in fuels was 114 million barrels (51st percentile), with substantial positions in U.S. gasoline (64 million barrels) and U.S. diesel (33 million barrels).

Funds have bought gasoline for five weeks running, adding a total of 38 million barrels since the middle of October.

U.S. natural gas
Hedge funds and other money managers sold the equivalent of 236 billion cubic feet (bcf) in futures and options based on delivery to Henry Hub in Louisiana.

Sales over the last three weeks have totalled 958 bcf and reduced the net position to its lowest level since the end of September.

As a result, the net position was cut to a net short of 15 bcf which was in only the 31st percentile for all weeks since 2010.

Fund managers’ repeated efforts to build a bullish long position in gas have been thwarted by warmer than average temperatures and strong production growth.

Working gas inventories in underground storage were +128 bcf (+3% or +0.49 standard deviations) above the prior ten-year seasonal average on Nov. 17.

The surplus had swelled from +60 bcf (+2% or +0.23 standard deviations) at the start of October despite very low prices.

Given the persistent surplus, prices will likely have to remain very low for the next few months to force the market towards balance.


(Reuters - John Kemp is a Reuters market analyst. The views expressed are his own. Editing by Mark Potter)

Categories: Energy Oil

Related Stories

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

MODEC and Terra Drone Renew FPSO Drone Inspection Partnership

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

French Oil Major Acquires Interests in Multiple Blocks in Southeast Asia

ABL Lands Work on BP’s Indonesian Gas and CCUS Project

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

TPAO, SOCAR and BP to Ink Caspian Sea Oil and Gas Production Deal

Fugro Lands Deepwater Gas Field Job in Southeast Asia

Current News

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com