LONDON - Portfolio investors had reverted to a broadly neutral position in petroleum last week after heavy selling triggered by the OPEC+ meeting at the start of June waned and buying took over.

Hedge funds and other money managers purchased the equivalent of 56 million barrels in the six most important futures and options and contracts over the seven days ending on July 2.

Fund managers have been net buyers in each of the last four weeks, purchasing a total of 316 million barrels since June 4, according to exchange and regulatory records.

The wave of buying has more than reversed the 194 million barrels sold in the aftermath of the OPEC+ meeting at the beginning of June.

The resulting position of 524 million barrels was in the 40th percentile for all weeks since 2013 and broadly neutral or slightly bearish.

Chartbook: Oil and gas positions

In the most recent week, buying was led by Brent (+37 million barrels), NYMEX and ICE WTI (+13 million) and U.S. diesel (+12 million).

There were minor sales of both U.S. gasoline (-3 million barrels) and European gas oil (-3 million).

Fund managers were still moderately bearish about most parts of the petroleum complex, a transformation from being extremely bearish just a few weeks earlier.

But they were also broadly neutral about WTI and extremely bullish about European gas oil.

Bearish short positions in the NYMEX WTI contract had been reduced to 27 million barrels, the lowest for 15 weeks since the middle of March.

With so few short positions remaining, short-covering is unlikely to provide much more upside momentum to crude prices.


Portfolio managers sold futures and options linked to U.S. gas prices for the second week running as concerns grew about the persistent storage surplus despite heatwaves across much of the country.

Hedge funds and other money managers sold the equivalent of 270 billion cubic feet (bcf) in the two major contracts linked to prices at Henry Hub in Louisiana over the week ending on July 2.

Fund managers have sold a total of 349 bcf since June 18, making a small dent in the 2,845 bcf accumulated over the previous 17 weeks since the middle of February.

The net long position of 821 bcf was in the 52nd percentile for all weeks since 2010, down from 1,170 bcf (59th percentile) on June 18 but still up from a net short of 1,675 bcf (3rd percentile) on February 20.

Inflation-adjusted futures prices have been stuck near multi-decade lows, encouraging many fund managers to build bullish long positions anticipating they must rise towards something more like the long-term average.

Ultra-low prices forced major gas producers to announce cutbacks to drilling and production programmes back in February.

Low prices were also expected to encourage maximum consumption by power generators during the summer of 2024, hastening the erosion of surplus inventories carried over from a very mild winter in 2023/24.

Despite several heatwaves, however, the storage surplus has narrowed very slowly, forcing fund managers to temper some of their previous bullishness.

Working gas stocks in underground storage amounted to 3,134 bcf on June 28, the second-highest level on record for the time of year.

Inventories were still 536 bcf (+21% or +1.40 standard deviations) above the prior 10-year seasonal average, down from a maximum late-winter surplus of 664 bcf (+40% or +1.47 standard deviations) on March 15.

Such high inventories have pushed back the rebalancing of the market and will ensure prices remain lower for longer.

Reflecting the slow adjustment, prices for gas delivered in January 2025, the middle of next winter, have slumped to an average of $3.71 per million British thermal units so far in July - no higher than they were in February.

John Kemp is a Reuters market analyst. The views expressed are his own. Follow his commentary on X

(Editing by Emelia Sithole-Matarise)