Confidence in economic recovery increases oil purchases to accelerate

According to a column report on May 10 by Reuters, hedge funds increased their oil positions for the fourth consecutive week, as optimism about oil consumption and prices rebounded after setbacks in March.

As of the week of May 4, hedge funds and other fund managers purchased the six most important oil futures and options contracts equivalent to 40 million barrels of oil.

Portfolio managers bought 102 million barrels of crude oil in the past four weeks, reversing sales of 113 million barrels between mid-March and early April.

In the past week, there have been buying orders across the entire exchange, mainly West WTI crude oil (up 14 million barrels) and Brent crude (up 11 million barrels) on the New York Mercantile Exchange and the Intercontinental Exchange, and European gasoline (up 700 million barrels).

The ratio of long positions to short positions is close to 6:1, almost back to the previous peak in mid-February, and is in the 80th percentile for all weeks since the beginning of 2013, which means that the market generally believes that prices will continue Go higher.

The pace at which hedge funds buy crude oil and refined oil is accelerating and expanding, which is consistent with the increasing confidence in the economic recovery and the cyclical rebound in oil consumption.

The rise in India's coronavirus infection and the delayed recovery of passenger airlines no longer deter investors who are bullish on oil, and buyers expect oil consumption to continue to increase later this year.

In recent weeks, the number of oil rigs in the United States has also stabilized, which means that shale oil production growth has slowed in the second half of this year, which will help support oil prices at a higher level.

Compiled by Qiu Yin from Reuters

The original text is as follows:

Column: Oil buying accelerates amid growing confidence in economic recovery: Kemp

Hedge funds boosted their position in petroleum for the fourth week running, as bullishness about oil consumption and prices rebounded after the setback in March.

Hedge funds and other money managers purchased the equivalent of 40 million barrels in the six most important petroleum futures and options contracts in the week to May 4.

Portfolio managers have bought 102 million barrels over the last four weeks, reversing sales of 113 million barrels between the middle of March and early April.

In the latest week, there were purchases across the complex, led by NYMEX and ICE WTI (+14 million barrels) and Brent (+11 million) but also European gasoil (+7 million), US gasoline (+6 million) and US diesel (+1 million).

Long positions outnumber shorts by a ratio of nearly 6:1, almost back to the previous peak in mid-February, and in the 80th percentile for all weeks since the start of 2013, implying a broad consensus that prices are headed even higher.

The rate of hedge fund buying is accelerating and widening to include both crude and refined fuels, consistent with growing confidence about an economic recovery and cyclical upturn in petroleum consumption.

Rising coronavirus infections in India and a delayed resumption in passenger aviation are no longer deterring oil bulls, with buyers anticipating consumption will nonetheless increase later in the year.

　　In recent weeks, the number of rigs drilling for oil in the United States has also flattened out, implying a slower increase in shale production over the second half of the year, helping support prices at a higher level.