Investors Adjust Positions Amid Stable Markets and Rising Crude Prices

Investors reduced their bearish short positions in petroleum after financial markets stabilized and crude prices rose above $75 per barrel. Hedge funds bought 74 million barrels of petroleum futures and options. While front-month Brent crude prices increased to around $81 per barrel, concerns about economic outlook and petroleum consumption continue to cap further price rises.

Investors trimmed their bearish short positions in petroleum after financial markets steadied and crude prices found support above $75 per barrel. Hedge funds and other money managers purchased 74 million barrels in the most important petroleum futures and options contracts over the week ending on Aug. 13.

Most purchases were from buying back previous bearish short positions rather than creating fresh bullish ones. Fund managers bought 44 million barrels of Brent, 17 million of WTI, and smaller amounts of gasoline, diesel, and gas oil.

The wave of short-covering followed a plunge in crude prices to an eight-month low, leading to crowded bearish trades and a high probability of a short-term bounce. Despite the short-covering, the combined position was still in the 3rd percentile for all weeks since 2013.

Front-month Brent prices rose to around $81 per barrel, in line with long-term inflation-adjusted averages. However, lingering doubts about economic outlook and petroleum consumption continue to cap further price rises.

In U.S. natural gas, investors maintained a broadly neutral position for the third week. Hedge funds bought 20 billion cubic feet in gas futures and options. Inventories have risen slowly due to low prices boosting gas-fired generation, but stocks are still above the ten-year seasonal average with a gradual erosion expected to continue.

John Kemp, a Reuters market analyst, provides detailed insights into these trends. Follow his commentary on X for more updates.

(With inputs from agencies.)