LONDON, Dec 6 (Reuters) - Fears over the Omicron coronavirus
variant's impact on international aviation and other sources of
oil demand have prompted massive liquidation of previously
bullish hedge fund positions.
Hedge funds and other money managers sold the equivalent of
131 million barrels in the six most important petroleum futures
and options contracts in the week to Nov. 30 (https://tmsnrt.rs/31wlm1Q).
The one-week sale was the 13th largest in 455 weeks since
the start of 2013 and was a result of Omicron fears converging
with low levels of liquidity after the Thanksgiving holiday in
the United States.
Total sales since the start of October have reached 293
million barrels, according to position records published by ICE
Futures Europe and the U.S. Commodity Futures Trading
In the most recent week there was heavy selling across Brent
(-45 million barrels), NYMEX and ICE WTI (-43 million), European
gas oil (-22 million), U.S. gasoline (-13 million) and U.S.
heating oil (-8 million).
The combined position across all six contracts has fallen to
578 million barrels (44th percentile for all weeks since 2013),
down from 871 million barrels (79th percentile) on Oct. 5.
Bullish long positions outnumber bearish short ones by a
ratio of 3.9:1 (48th percentile), down from 6.7:1 (84th
percentile) eight weeks ago.
In benchmark Brent, fund positions have been cut drastically
to 167 million barrels (24th percentile), down from 333 million
barrels (69th percentile).
Portfolio managers had been selling crude and other products
in small volumes regularly through October and November,
realising some profits after the earlier price rally.
Sales also reflected concerns that the market could become
overheated, with the long-short position very lopsided, as well
as growing expectations of a release of emergency oil stocks.
Omicron arrived in a market that was already trending down
and served to turn gentle selling pressure into a flood at a
time when low liquidity helped to create the conditions for
prices to plunge.
The new coronavirus variant has shaken the speculative froth
out of the market and left benchmark prices close to long-term
averages in real terms and positions neutral.
- Oil positions and prices back to neutral after
Omicron-triggered flash crash
- No shock and awe after U.S.-led emergency oil release
(Reuters, Nov. 24)
- Oil futures hit by heavy selling
- Hedge funds put brakes on oil buying as economy concerns
grow (Reuters, Nov. 1)
(Reporting by John Kemp
Editing by David Goodman)