Prospective disruption to Russia’s petroleum exports from the planned G7 price cap as well as the reduction of OPEC+ production targets are encouraging more hedge funds to build bullish positions in the crude oil market.

Hedge funds and other money managers purchased the equivalent of 35 million barrels in the six most important petroleum futures and options contracts in the week ending on Nov. 1.

Nearly all the buying was in Brent (+22 million barrels) and NYMEX and ICE WTI (+15 million) with minor buying in U.S. diesel (+1 million) but sales in European diesel (-1 million) and U.S. gasoline (-2 million).

The net position in crude had climbed to 414 million barrels (30th percentile for all weeks since 2013) up from a recent low of 14 million barrels (10th percentile) at the end of September.

Bullish long positions outnumbered bearish short ones by a margin of 5.09:1 (60th percentile) up from 3.78:1 (37th percentile) in late September.

Fund managers are being tempted back into crude by the tightening supply outlook, which has begun to outweigh concerns about a faltering global economy and oil consumption.

The tightening supply outlook has dispelled some of the extreme bearishness that surrounded crude prices at the end of the third quarter.

But the worsening economic outlook has ensured confidence remains limited and kept the number of positions low so far.

Since 2013, the median position in crude oil has been just over 500 million barrels, still some 90 million barrels higher than last week.
Source: Reuters (Editing by Jane Merriman)