Monday, 12 December 2016

Hedge funds’ bullish U.S. crude bets soar to six-week high after OPEC deal

In Oil & Companies News 12/12/2016

Hedge funds rushed to place bullish wagers on U.S. crude oil, data showed on Friday, after the world’s largest producers agreed to curb output for the first time since 2008 in an effort to rein in a glut and support prices.
The speculator group raised its combined futures and options position in New York and London by 86,085 contracts to 275,763 in the week to Dec. 6, data from the U.S. Commodity Futures Trading Commission (CFTC) showed. That was the biggest weekly increase since late August, when speculators boosted bullish bets by a record 88,924 contracts.
The increase brought total net longs in U.S. crude futures and options to the highest since Oct. 18.
Members of the Organization of the Petroleum Exporting Countries (OPEC), which accounts for a third of global crude supply, agreed last week to cut production from January by around 1.2 million barrels per day (bpd), or over 3 percent, to 32.5 million bpd.
Oil prices rallied nearly 13 percent in the week to Dec. 6 after OPEC announced the deal.
The rally also prompted U.S. shale producers to pounce on the opportunity to hedge and lock in future output.
Gross short positions among producers rose to the highest since May 2010 at 657,487 lots in New York, CFTC data showed.
In the days leading up to the OPEC deal, there was widespread speculation of a rift among member countries about the terms of the deal and potential exceptions to the agreement, leading to some speculators cutting back on bullish bets.
However, OPEC kingpin Saudi Arabia and rival Iran were able to negotiate a deal successfully.
Since the deal was announced, prices have edged slightly lower to around $50 a barrel as many market participants questioned the deal’s implementation.
On Friday, crude prices were up about 1 percent on hopes that non-OPEC producers meeting in Vienna over the weekend would agree to output restrictions to go along with the OPEC deal. OPEC oil ministers will meet with non-OPEC producers on Saturday. [O/R]
Russia’s energy minister said on Friday he expected non-OPEC producers to fully contribute to output cuts agreed earlier with OPEC.
U.S. crude stockpiles fell last week even as inventories piled up at the Cushing, Oklahoma hub. Inventories fell 2.4 million barrels in the week ended Dec. 2, compared with analyst expectations for a draw of 1 million barrels. [EIA/S]
Among refined products, speculators boosted bullish bets in RBOB gasoline, with a combined futures and options net long position of 40,473 contracts in the week to Dec. 6, a one-month high.
Speculators also piled into bullish bets on heating oil, pushing the net long position to the highest level since July 2014 with 24,290 contracts as demand picked up with forecasts for a colder winter.

Source: Reuters (Reporting by Devika Krishna Kumar in New York; Editing by Andrew Hay and Meredith Mazzilli)