Oil hedge fund optimism fades: Kemp

LONDON (Reuters) – Hedge funds have sold oil for the seventh time in nine weeks, as rising coronavirus infections in major oil-consuming markets dampened hopes of a rapid recovery in aviation from long-haul passengers.

FILE PHOTO: A pumpjack is seen in Fellows, Calif. April 3, 2010. REUTERS / Lucy Nicholson

Hedge funds and other fund managers sold the equivalent of 40 million barrels in the six largest futures and options contracts in the week to August 17, bringing total sales to 253 million barrels since June 15.

In the most recent week, the funds were sellers of Brent (-25 million barrels), NYMEX and ICE WTI (-9 million), US gasoline (-3 million), US diesel (-1 million) and European diesel. (-3 million).

Most of the sales were profit taking on existing bullish long positions (-28 million barrels) but there were also further bearish short sales (+12 million), as the outlook for oil consumption in the second semester deteriorated.

The combined position on the six contracts fell to 692 million barrels (the 62nd percentile for all weeks since 2013), from a recent peak of 945 million barrels (85th percentile) in mid-June.

Long positions outnumber short positions by a ratio of 4.26: 1 (58th percentile), down from 6.06: 1 (80th percentile) nine weeks ago, as the community’s former uptrend of funds dissipated (tmsnrt.rs/3Da0M5u).

The growing number of new cases of coronavirus in Asia, Europe and especially North America has delayed the return to the office of many employees as well as the early resumption of business and leisure flights.

Many governments will remain reluctant to relax quarantines for international travelers and other restrictions on mobility until coronavirus transmission is better controlled and the northern hemisphere winter is over.

As a result, the anticipated increase in long-haul aviation has been postponed from the second half of 2021 to 2022, delaying the expected increase in oil consumption.

Associated columns:

– The trajectory of oil prices depends on the next phase of the pandemic (Reuters, August 20)

Oil prices hammered by soaring coronavirus cases (Reuters, August 19)

– Coronavirus outbreaks delay full recovery in oil demand (Reuters, August 17)

– Funds sell oil as coronavirus infections rise (Reuters, August 16)

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