Crude oil’s bull run slows down
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new york — Oil’s bull run is grinding to a halt.
Hedge funds lowered their bets on Brent crude after they rose to a record a week earlier. And the netbullish position on West Texas Intermediate, which hit a nine-month high last month, dwindled for a third straight week. The message: After a months-long build-up, investors are wavering, concerned US crude will continue to boom in 2018, undercutting Opec’s push to drain a global glut.
“It seems like now most people have got their positions and are waiting to see what 2018 brings,” said Rob Thummel, managing director at Tortoise Capital Advisors.
Oil futures in New York have jumped almost 40 per cent since June as Opec and its allies extended their production-cut deal and US inventories shrank to two-year lows. But the decline in American stockpiles is largely due to refinery maintenance and exports near an all-time high. Meanwhile gushers in the country are producing at a record pace.
Global stockpiles won’t fall enough to reach the level targeted by Opec when the group meets in June, Saudi Arabia’s Energy Minister Khalid Al Falih said last week.
American output is poised to reach 9.99 million barrels a day in May, according to the Energy Information Administration. That would surpass Saudi Arabia’s curtailed production of 9.97 million barrels a day in November.
Net positions
The Brent net-long position — the difference between bets on a price increase and wagers on a drop — fell 1.1 per cent to 538,045 contracts in the week ended December 19, according to data from ICE Futures Europe. That’s after reaching a record 544,051 contracts in the previous week. Longs fell 1.2 per cent while shorts decreased 1.8 per cent.
Money managers cut their WTI net-long position by 1.8 per cent to 383,828 futures and options during the week, according to data from the US Commodity Futures Trading Commission on Friday. Longs fell by 1.2 per cent while shorts rose 3.9 per cent.
“It’s been a good year,” but there’s “some worry about what next month is going to bring,” said John Kilduff, founding partner at Again Capital in New York. “There’s not as much enthusiasm about the Opec/ non-Opec accord as there was even a few weeks ago.”
In the fuel market, money managers reduced their net-long position on benchmark US gasoline by 2.1 per cent. Meanwhile, the netbullish position on diesel rose by 1.9 per cent.
Heading into next year, investors will be watching how long it takes to get inventories back to the fiveyear average, Thummel said. The Opec deal extension brought some certainty to the market, which is now waiting to see how the cuts and US production play out.
“That was the big cloud overhanging the oil market and prices,” he said.