NNA - Portfolio investors resumed selling petroleum futures and options, especially those tied to crude, amid renewed doubts about growth in oil consumption in 2024.

Hedge funds and other money managers sold the equivalent of 66 million barrels in the six most important petroleum futures and options contracts over the seven days ending on Jan. 2.

Sales were concentrated in crude (-63 million barrels), distributed roughly equally between NYMEX and ICE WTI (-33 million) and Brent (-30 million).

There were only minor sales of European gas oil (-5 million barrels), minor purchases of U.S. gasoline (+1 million) and no change in U.S. diesel.

Chartbook: Oil and gas positions

On the crude side, nearly all the sales came from the establishment of new bearish short positions (+59 million barrels), rather than the liquidation of existing bullish longs (-3 million).

Fund managers resumed the short selling that prevailed for ten weeks until Dec. 12, when it was interrupted by two weeks of repurchasing before year end.

In the premier NYMEX WTI contract, short positions were boosted to 121 million barrels, not far below the previous peak of 128 million on Dec. 12.

Before the end of the calendar year, short covering provided only limited price support. With the start of a new year, renewed selling has put them under downward pressure again.

Most funds are focusing on the threat to consumption from slow global growth rather than to production from conflict in the Middle East.

Increasing production from Brazil, Guyana and U.S. shale plays is expected to be enough to satisfy anaemic consumption growth in 2024.

In addition, there is an assumption Saudi Arabia and its OPEC+ partners can't or won't cut output further to lift prices sustainably in the short term.

Cutting production again would simply throw another lifeline to rival producers and concede even more market share.--Reuters 

============R.H.