LONDON, April 15 (Reuters) - Investors were becoming progressively more bullish towards crude oil and refined petroleum products even before Iran launched an unprecedented wave of missiles and drones towards Israel.
Hedge funds and other money managers bought the equivalent of 32 million barrels in the six most important petroleum futures and options contracts over the seven days to April 9.
Positions were reported to the U.S. Commodity Futures Trading Commission and ICE Futures Europe days before the Iranian attack on April 13-14.
Fund managers had been net buyers in 11 of the last 17 weeks, purchasing a total of 478 million barrels since Dec. 12.
In consequence, the combined position had increased to 685 million barrels (66th percentile for all weeks since 2013) up from 207 million (1st percentile).
The most recent week saw buying across the board in NYMEX and ICE WTI (+11 million barrels), Brent (+4 million), U.S. gasoline (+1 million), U.S. diesel (+3 million) and European gas oil (+13 million).
Chartbook: Oil and gas positions
Investors remained exceptionally bullish towards U.S. gasoline with a net position of 85 million barrels (88th percentile).
Bullish long positions outnumbered bearish short ones by a ratio of 4.90:1 (57th percentile) indicating positioning had not yet become stretched.
The threat of escalating conflict in the Middle East disrupting crude and diesel supplies to Europe has led to a big buildup of positions in Brent and European gas oil.
Fund managers had amassed a net position of 304 million barrels (70th percentile) in Brent and 69 million barrels (75th percentile) in gas oil.
Overall, fund positions had become moderately bullish, but not lopsided, limiting the risk of a sharp reversal in prices for the time being.
US NATURAL GAS
Portfolio investors made few changes to their positions in U.S. natural gas futures and options for the fifth week in a row; net purchases amounted to just 22 billion cubic feet (bcf).
The combined position in the two most important contracts linked to prices at Henry Hub in Louisiana was equivalent to a net short of 310 bcf (24th percentile for all weeks since 2010).
The combined position had not changed significantly from a net short of 562 bcf (17th percentile) on March 12 despite the announcement of drilling and production cuts by a number of major shale gas producers.
Production cuts will take time to erode inventories and in the meantime temperatures have remained mild, keeping gas consumption low.
Working gas inventories were still in an enormous surplus of 634 bcf (+38% or +1.36 standard deviations) above the prior 10-year seasonal average on April 5.
The surplus has swelled from 64 bcf (+2% or +0.24 standard deviations) on Oct. 1 after the warmest winter on record across the northern hemisphere.
With so much gas still in storage and limited capacity for refilling over the summer, prices remain close to the lowest level in real terms since the early 1970s to encourage maximise consumption by power producers and industrial users.
Related columns:
- Investors bet on further rise in U.S. gasoline prices (April 10, 2024)
- Oil funds turn bullish as Mideast conflict intensifies
John Kemp is a Reuters market analyst. The views expressed are his own. Follow his commentary on X https://twitter.com/JKempEnergy (Editing by Tomasz Janowski)
