Crude oil inventories show signs of stability

HEDGE fund managers have started to take profits from the big rise in crude oil and refined products prices since June, now the rally has lost momentum and inventories are showing signs of stabilising.

Portfolio managers cut their combined net long position in the five major futures and options contracts linked to petroleum prices by the equivalent of 34 million barrels in the week to December 5.

Net long positions were reduced to 1 120 million barrels, from the previous week’s record of 1 155 million, according to an analysis of position data published by regulators and exchanges.

The biggest reductions in bullish positions came in US heating oil and petrol, where positions had reached record levels in recent weeks.

Net long positions in heating oil fell by 13 million barrels to 61 million barrels, from a record 75 million the previous week. Long positions were cut by 9 million barrels while short positions were boosted by 4 million barrels.

Net long positions in petrol fell by 8 million barrels, having declined by 3 million barrels and 7 million in the two previous weeks, and were down to just 107 million barrels on December 5 from a record 125 million barrels on November 14.

Profit-taking by the holders of bullish long positions rather than short-selling by hedge funds establishing fresh shorts accounted for most of the reduction in net length.

The same phenomenon was evident in European gasoil, which is not included in the analysis of the five major petroleum contracts.

Net long positions in gasoil fell by more than 1.1 million tons to 14.7 million tons, with long positions down 0.9 million tons while short positions rose by 0.2 million tons.