Column: Oil bulls pull back as economic outlook darkens: Kemp

An Oil and Natural Gas Corp (ONGC) well is pictured in an oil field on the outskirts of the western city of Ahmedabad, India February 10, 2016. REUTERS/Amit Dave

LONDON, July 4 (Reuters) – Investors continued to liquidate long bullish positions in oil last week as the economic outlook deteriorated, although the pace of selling was much slower after a sell-off the previous week. .

Hedge funds and other money managers sold the equivalent of 9 million barrels in the six largest futures and options contracts in the week to June 28, after selling 71 million during the week prior to June 21.

Most of the recent adjustments have come from the liquidation of old bullish long positions as the outlook for the economy and oil consumption has darkened amid rising inflation and interest rates.

Fear of further US and EU sanctions on Russia’s oil exports has so far deterred aggressive short selling of the oil complex.

Over the past three weeks, the total number of bullish long positions has been reduced by 87 million barrels, while bearish short positions have increased slightly by 5 million barrels (https://tmsnrt.rs/3y7sI84).

Last week saw sales of Brent (-12 million barrels), European diesel (-4 million), US gasoline (-3 million) and US diesel (-2 million) partially offset by purchases of NYMEX and ICE WTI (+11 million).

Upside price risks from the sanctions on Russian crude and distillates are now offset or over-offset by downside risks from the loss of momentum in manufacturing and freight.

As a result, fund managers gradually took risk off the table, with the combined position falling to 556 million barrels (39th percentile for all weeks since 2013) from 761 million (71st percentile) in mid-January.

Associated columns:

– Funds sell oil at fastest pace in 15 weeks as economic outlook deteriorates (Reuters, June 27) read more

– Diesel demand set to fall as economies slide into recession (Reuters, June 23) read more

– Hedge fund oil hikes checked as interest rates rise (Reuters, June 20) read more

John Kemp is a market analyst at Reuters. Opinions expressed are his own.

Editing by David Evans

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