(John Kemp is a Reuters market analyst. The views expressed are
* Chartbook: http://tmsnrt.rs/2ke0CD4
By John Kemp
LONDON, Dec 18 (Reuters) - Hedge fund managers have boosted
their bullish positions in Brent futures and options in response
to the shutdown of the Forties oil pipeline, according to an
analysis of regulatory and exchange data.
But bullishness in Brent cannot completely conceal the
increasing staleness of long positions in the rest of the rest
of the petroleum complex, as prices fail to rise further and the
end of year approaches.
Portfolio managers raised their net long position in Brent
by 10 million barrels to a record 544 million barrels in the
week ending on Dec. 12 (http://tmsnrt.rs/2ke0CD4).
Long positions in Brent rose by 8 million barrels, which was
relatively modest given the complete outage of the Forties
pipeline system, while short positions were trimmed by 1 million
But across the five major petroleum contracts as a whole,
which include NYMEX and ICE WTI, U.S. gasoline, U.S. heating
oil, as well as Brent, the net long position was cut by 3
Net long positions in WTI and gasoline were each cut by 8
million barrels with only heating oil up by 3 million barrels.
Hedge funds' net long position in gasoline has been cut by
26 million barrels or 26 percent over the last four weeks.
There has been no real increase in hedge fund positions in
petroleum since the second half of November, as managers become
more cautious following the big rise in prices since June.
The near-record number of long positions in petroleum has
itself become a significant source of downside risk if and when
hedge fund managers attempt to realise some profits.
Fund managers still hold more than eight long positions in
petroleum for every short position, up from a ratio of less than
2:1 at the end of June.
In the past, such lopsided positioning has often preceded a
sharp reversal in prices when hedge fund managers attempt to
crystallise some of their paper gains.
Benchmark Brent prices have been essentially flat since
early November, which suggests the rally may have run out of
momentum, and has probably increased the risk of profit-taking.
In the circumstances, it is not surprising that portfolio
managers are reluctant to add to their near-record long
positions in crude and refined products.
Only the Forties pipeline outage has prevented a much bigger
liquidation of hedge fund positions and likely a much larger
fall in prices.
"Brent eases as traders become more sanguine about
pipeline", Reuters, Dec. 14
"Hedge funds start to take profits after oil rally,",
Reuters, Dec. 11
"Crude rally stalls as fuel prices soften," Reuters, Dec. 7
(Editing by David Evans)
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