(Repeats with no changes. John Kemp is a Reuters market
analyst. The views expressed are his own)
* Chart 1: tmsnrt.rs/2p10Ih8
* Chart 2: tmsnrt.rs/2oSQUu5
* Chart 3: tmsnrt.rs/2p4eu32
* Chart 4: tmsnrt.rs/2pDvctm
By John Kemp
LONDON, May 2 Hedge funds are losing faith that
OPEC can accelerate the rebalancing of the oil market even if
the group agrees to extend output cuts when it meets later this
Hedge funds and other money managers cut their combined net
long position in the three main futures and options contracts
linked to Brent and WTI by 139 million barrels in the week to
April 25 (tmsnrt.rs/2p10Ih8).
The reduction was one of the largest weekly falls on record,
and reverses a cumulative increase of 140 million barrels over
the previous three weeks, according to data from regulators and
Fund managers are now much less bullish about the outlook
for crude oil prices than they were back at the start of the
Bullish long positions outnumber bearish short positions by
a ratio of 4:1, down from 7:1 at the start of the year and a
peak of more than 10:1 in late February (tmsnrt.rs/2p4eu32).
The number of long positions has fallen to the lowest level
since before OPEC announced its output agreement on Nov. 30 (tmsnrt.rs/2pDvctm).
At the same time, the number of short positions has been
trending higher since late February, despite periodic
Fund managers have become less bullish despite increasingly
strong indications from OPEC that it will roll over production
cuts for another six months.
Traders no longer believe the cuts will be enough to
rebalance the market in the second half of the year even if they
In the three months from the end of November to the end of
February, fund managers increasingly bet OPEC's output cuts
An informal understanding between OPEC and the hedge fund
community helped boost prices and give oil producers an early
But the continued rise in reported crude stocks and the
futures market's failure to switch from contango to
backwardation has forced a reassessment.
In addition, the continued rise in shale drilling has
created concerns about a big increase in oil production from the
United States later in the year.
Since March, hedge fund managers have increasingly wagered
OPEC's rebalancing effort will fail, weighing on prices.
Hedge funds are now less bullish even though prices are
lower, which shows how much confidence in the OPEC/non-OPEC
accord has fallen.
Simply announcing OPEC and non-OPEC compliance figures and
an extension of the agreement is no longer enough.
Traders and fund managers are demanding evidence the
agreement is working in the form of a reduction in reported
stockpiles and a cut in tanker exports.
Crude stocks typically fall during the third quarter owing
to the summer driving season in the United States and an
increase in direct crude burning in Saudi Arabia and Iraq.
Traders and fund managers will likely evaluate OPEC's
extended agreement on whether stocks fall more than normal this
year and if crude loadings in the Middle East Gulf actually drop
between June and September.
(Editing by David Evans)