Monday, January 24, 2022

COLUMN-Oil bulls return when the Omicron threat disappears: Kemp

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(John Kemp is a market analyst. The views expressed are his own)

LONDON, Jan. 4 () – Portfolio investors have begun rebuilding their positions in the oil market in 2022 by reassessing previous fears about the impact of the Omicron variant of the coronavirus on major economies and passenger aviation.

Hedge funds and other money managers bought the equivalent of 54 million barrels in the six most important oil futures and option contracts in the week to Dec. 28 (tmsnrt.rs/3JE0yqq).

According to records released by regulators and exchanges, the fund has bought a total of 70 million barrels in the last two weeks after selling 327 million in the last 10 weeks.

Last week’s acquisition was among the fastest since August and the fastest in more than a year, reflecting a sharp shift in investor sentiment from the previous decline.

Purchases were evenly distributed between the establishment of new uptrend long positions (+32 million barrels) and the closing of short positions in the previous downturn (-22 million).

The ratio of long and short positions rose from 3.83: 1 (47 percent) two weeks ago to 4.86: 1 (at 64 percent for all weeks since 2013).

In the most recent week, funds were the main buyers of Brent (+33 million barrels) and NYMEX and ICE WTI (+15 million), with smaller gas oil purchases from Europe (+7 million).

In the U.S. alone, there were small purchases of heating oil (+1 million barrels) and small sales of U.S. gasoline (-2 million).

The procurement model, with its concentration in crude and medium distillates, is consistent with the ongoing growth in the macroeconomic cycle, despite the rapid spread of Omicron.

Funds say they no longer justify pessimism about international quarantines and the impact on global recovery, which put pressure on oil prices in November and early December.

Portfolio managers expect a continued recovery in oil consumption, including jet fuel consumption, along with limited production growth by OPEC, its allies and U.S. shale companies, which will ensure prices continue to be a high trend in 2022. .

Related columns:

– Low-level hedge fund oil positions create re-entry point (December 13)

– The oil market is on the verge of closing the hedge fund (December 6)

– Oil positions and prices returned to neutral after a flash crash triggered by Omicron (November 30)

– Oil futures sell strong (November 22) (edited by David Evans)

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