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Column: Oil futures hit by heavy selling: Kemp

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A maze of crude oil pipes and valves is pictured throughout a tour by the Division of Power on the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson

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LONDON, Nov 22 (Reuters) – Petroleum futures and choices have been hit by heavy profit-taking final week as hypothesis a few potential launch of strategic oil reserves and intensifying considerations concerning the state of the worldwide economic system hit sentiment.

Hedge funds and different cash managers offered the equal of 57 million barrels within the six most necessary petroleum-related futures and choices contracts within the week to Nov. 16.

Final week’s gross sales have been the very best for greater than three months, in line with place data from ICE Futures Europe and the U.S. Commodity Futures Buying and selling Fee (https://tmsnrt.rs/30Os1n7).

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The heaviest promoting was concentrated in NYMEX and ICE WTI (-34 million barrels) and Brent (-18 million), per the opportunity of a strategic shares launch led by the US.

Among the many different contracts, gross sales of U.S. diesel (-2 million barrels) and European gasoline oil (-12 million) have been largely offset by purchases of U.S. gasoline (+9 million).

Throughout the six main contracts, portfolio managers have been sellers in 5 out of the final six weeks, decreasing their positions by an mixture 134 million barrels since Oct. 5.

The mixed place has fallen to 736 million barrels (66th percentile for all weeks since 2013) down from 871 million barrels (79th percentile) firstly of October.

The adjustment has come largely from the liquidation of earlier bullish lengthy positions (-115 million barrels) somewhat than the creation of latest bearish shorts (+19 million), per profit-taking after an enormous rally.

Because of this, the mixed place has develop into much less lopsided, with longs outnumbering shorts by a ratio of 5.3:1 (71st percentile) down from 7.0:1 (87th percentile) in mid-October.

The transformation has been particularly noticeable in Brent crude, the place fund managers have minimize their place by 111 million barrels within the final six weeks.

Brent positions have fallen from 333 million barrels (68th percentile) to only 222 million barrels (forty first percentile) whereas the long-short ratio has tumbled from 6.3:1 (68th percentile) to only 3.4:1 (thirty first percentile).

By the beginning of October, hypothesis within the oil market had develop into overheated, with most traders anticipating additional huge beneficial properties in costs, at the same time as costs have been touching their highest degree for 3 years.

Since then, considerations concerning the sustainability of the worldwide financial enlargement and the resurgence of coronavirus circumstances in Europe and North America have taken among the warmth out of oil costs.

The futures market is transferring into the seasonally weaker half of the yr, with speak about a coordinated launch of strategic shares including to downward dangers, prompting fund managers to grasp some earnings from the sooner rally.

Associated columns:

– Petroleum futures see mild hedge fund promoting (Reuters, Nov. 16) learn extra

– Seasonal weak spot might take some warmth out of oil costs (Reuters, Nov. 11) learn extra

– Revenue-taking hits hedge funds’ oil positions (Reuters, Nov. 8) learn extra

– Hedge funds put brakes on oil shopping for as economic system considerations develop (Reuters, Nov. 1) learn extra

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Modifying by David Evans

Our Requirements: The Thomson Reuters Belief Rules.

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