(Repeats April 24 column. John Kemp is a Reuters market
analyst. The views expressed are his own)
* Chart 1: tmsnrt.rs/2p97vXr
* Chart 2: tmsnrt.rs/2pWUMKz
* Chart 3: tmsnrt.rs/2p9aVts
* Chart 4: tmsnrt.rs/2pXkezz
* Chart 5: tmsnrt.rs/2oDrlbM
* Chart 6: tmsnrt.rs/2pX8gpm
By John Kemp
LONDON, April 24 Hedge funds have tempered their
bullishness towards crude oil as the short-covering rally that
gripped the market since the end of March ran its course.
Hedge funds and other money managers increased their net
long position in the three major futures and options contracts
linked to Brent and WTI by 8 million barrels in the week to
April 18 (tmsnrt.rs/2p97vXr).
Fund managers have increased their net long position for
three consecutive weeks by a total of 140 million barrels but
the latest increase was much smaller than in the two previous
Funds showed little appetite to increase bullish long
positions further, though they continued to close out bearish
short positions established earlier in March.
Funds actually reduced long positions by 2 million barrels,
though this was offset by a reduction in short positioning of 10
million barrels, according to an analysis of data published by
regulators and exchanges.
The ratio of long to short positions climbed to 5.8:1 up
from a recent low of 3.7 on March 28 though it was still well
below the peak of 10.3 set back on Feb. 21 (tmsnrt.rs/2p9aVts).
The rally in oil prices between March 27 and April 12 was
driven by short-covering as much as the establishment of fresh
But most of those short positions had been closed out by
April 11 and certainly by April 18 limiting further upward price
By April 18, hedge funds had reduced short positions in
NYMEX WTI to just 63 million barrels, down from a peak of 117
million barrels three weeks earlier (tmsnrt.rs/2pXkezz).
The minimum hedge fund short positioning in NYMEX WTI over
the last two years has been around 45-55 million barrels.
So with few short positions left to be covered, the rally in
Brent and WTI prices ran out of steam around the middle of
Both flat prices and calendar spreads have been softening as
the short-covering cycle is completed and amid growing doubts
about whether OPEC’s output cuts are draining crude oil stocks.
Brent calendar spreads for the second half of 2017 have been
weakening more or less continuously since April 7 (tmsnrt.rs/2oDrlbM)
and flat prices for June have been falling steadily since April
From the perspective of hedge fund positioning, the market
now looks reasonably balanced, with few shorts left to squeeze,
and fund managers running a large long position but not as
stretched as earlier in the year.
(Editing by Susan Thomas)