RPT-COLUMN-Oil prices stall as short-covering rally is completed: Kemp

(Repeats April 17 story with no changes to text) By John Kemp LONDON, April 17 (Reuters) - Investors finished covering their short positions in petroleum last week, after Saudi Arabia and its allies in OPEC? surprised traders by announcing an unexpected cut in their output target at the start of April. Hedge funds and other money managers purchased the equivalent of 36 million barrels in the six most important petroleum futures and options contracts over the seven days ending on April 11. Purchases over the three most recent weeks totalled 225 million barrels, among the largest increases over any three-week period in the last decade. As a result, fund managers held a combined position of 515 million barrels (34th percentile for all weeks since 2013) on April 11, up from just 289 million barrels (6th percentile) on March 21. Bullish long positions outnumbered bearish short ones by a ratio of 5.13:1 (66th percentile) up from 2.16:1 (16th percentile) three weeks earlier. But the pace of buying slackened noticeably last week as most of the short positions that existed in late March had been closed out. Short positions were trimmed by just 9 million barrels over the seven days ending on April 11, compared with 67 million in the week ending on April 4 and 48 million in the week to March 28. By April 11, total shorts had been reduced to just 125 million barrels (7th percentile) as bearish investors were squeezed out of the market.

Chartbook: Oil and gas positions

U.S. CRUDE, GASOLINE The most recent week saw hedge funds purchase NYMEX and ICE WTI (+22 million barrels), U.S. gasoline (+13 million) and U.S. diesel (+4 million) but no change in Brent and small sales of European gasoil (-3 million). Fund short positions in NYMEX WTI were reduced to 24 million barrels, the lowest for almost six months, and down from 127 million barrels three weeks earlier. The short-selling cycle that began around January 27, reflecting concerns about faltering growth, persistent inflation, rising interest rates and bank failures, had largely been completed by April 11. Its end has removed upward pressure on oil prices and explains why they have been broadly stable since April 11 after increasing rapidly over the previous three weeks. Hedge fund long positions in NYMEX WTI outnumbered shorts by 9.11:1 (73rd percentile) on April 11 up from 1.56:1 (1st percentile) on March 21.

U.S. NATURAL GAS Investors remain fairly bearish on the outlook for U.S. gas, though with prices already close to record lows in real terms the scope for them to decline further is limited. Funds purchased the equivalent of 49 billion cubic feet over the seven days ending on April 11 in the two main futures and options contracts based on deliveries at Henry Hub in Louisiana. The buying reversed 55 billion cubic feet the previous week, based on position records published by the U.S. Commodity Futures Trading Commission. Funds held a net short position of -55 billion cubic feet (30th percentile for all weeks since 2010) with the ratio of longs to shorts at 0.98:1 (also 30th percentile). But prices are already close to their lowest-ever level once adjusted for inflation. Front-month futures prices are in only the 1st percentile for all months since 1990 in real terms. From a fundamental and a positioning perspective, the balance of risks appears tilted towards the upside, once inventory levels start to decline more decisively.

Related columns: - OPEC? surprise squeezed oil shorts (April 11, 2023) - Surprise, squeezing the shorts, and revealed preferences (April 3, 2023) - Oil prices rebound on hedge fund short covering (April 3, 2023) - U.S. gas prices slump after mild winter leaves big surplus (March 24, 2023)

John Kemp is a Reuters market analyst. The views expressed are his own (Editing by Christina Fincher)

Reuters

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

off-the-wire

RPT-COLUMN-Oil prices stall as short-covering rally is completed: Kemp

By Reuters

Reuters

Reuters

Gold is never going back to $2,000: 'That's history,' prices to 3x from here – Peter Schiff

‘Biggest economic shift since Nixon’: Major U.S. monetary policy changes coming in 12-36 months – Jack Mallers

India joins South Africa in denying BRICS currency plans after Trump’s 100% tariff threat

Solid price gains for gold, silver after busy news weekend

Bitcoin remains a ‘speculative vehicle’ and ‘won’t work’ as a reserve: ‘I prefer gold’ – Ray Dalio