America’s oil supply glut catches funds off guard
new york — Crude markets are taking oil optimists by surprise yet again. Hedge funds boosted bets on a rally just before West Texas Intermediate prices tanked from a report showing surging American stockpiles. Wagers rose 7.3 per cent to the highest since April in the week through June 6, US Commodity Futures Trading Commission data show. The next day, futures fell the most since March and are lingering near this year’s lows.
“The last thing the market needed to see was that inventories in the US went up, when they are supposed to be going down seasonally,” Tamar Essner, an energy analyst at Nasdaq Inc in New York, said by telephone. The report “shows that there are some bulls that are starting to get more interested in the market, but I imagine that when we get the CFTC data next week to reflect the Wednesday selloff, we’ll see a bit of a reversal.”
All eyes turned to what’s happening in the US market after Opec’s deal to limit output failed to impress investors as it didn’t include deeper cuts, additional allied countries or an exit plan.
The report that American supplies of crude and products jumped the most since 2008 came as the last nail in the coffin. Futures — after reaching $52 a barrel in the run-up to the group’s meeting in Vienna last month — plunged to near $45 last week and traded around $46 on Monday.
Blame it largely on shale. As explorers in Texas lead the longest US drilling revival on record, confidence in Opec’s strategy wanes. Igor Sechin, chief executive officer of Russian giant producer Rosneft Oil Co PJSC, is among those who doubt the deal to reduce supplies will stabilise the market over the long term as US shale fills the shortfall.
Not only did supplies in the US surge in last week’s Energy Information Administration report, but the agency also forecasts US crude output will average more than 10 million barrels a day next year for the first time. Not even tension in the Middle East was able to get oil to pick up steam last week after the shock waves sent by the EIA report.
Hedge funds increased their
The last thing the market needed to see was that inventories in the us went up, when they are supposed to be going down seasonally Tamar Essner, Energy analyst, Nasdaq
WTI net-long position, or the difference between bets on a price increase and wagers on a drop, by 15,037 to 221,140 futures and options, the CFTC data show. Longs rose by 2.5 per cent, while shorts decreased by 7.4 per cent.
Money managers also boosted their net-long position on the benchmark US gasoline contract, by 6.5 per cent. Wagers on diesel flipped to a net-short position.
US total crude and product stockpiles increased by 15.5 million barrels to 1.35 billion in the week ended June 2, according to EIA data. Nationwide crude imports climbed by 356,000 barrels a day and exports dropped by 746,000 barrels a day, the largest decline on record. — Bloomberg