By: John Kemp – Reuters – Oil investors made few changes to their positions last week as prices remained poised between fears of a reduction in supply from Russia and a global slowdown in demand.
There are signs oil traders have absorbed much of the initial shock from Russia’s invasion of Ukraine and the threat of sanctions, with positions, prices, and volatility establishing new reference points.
Hedge funds and other money managers bought the equivalent of 7 million barrels in the six most important petroleum futures and options contracts in the week to May 3.
There were small purchases of Brent (+4 million barrels) and U.S. gasoline (+4 million) but no significant changes in NYMEX and ICE WTI, U.S. diesel, or European gas oil.
The combined position of 558 million barrels of oil has stayed basically unchanged for the last seven weeks since the middle of March.
(Chartbook: https://tmsnrt.rs/390vPGa)
Fund positions remain weighted towards refined oil products, especially diesel, reflecting the shortage of refining capacity and low fuel inventories.
Position changes have been small as traders weigh the offsetting impacts of sanctions on Russia’s oil exports and the disruptions to fuel demand caused by China’s lockdowns.
However, the total number of open futures contracts held by all types of traders increased for the first time in 11 weeks since Russia invaded Ukraine in late February.
The small increase was equivalent to just 20 million barrels and comes after open interest declined by 1,141 million barrels of oil over the previous ten weeks.
The slight rise indicates the risk-reduction process may have run its course as prices and volatility have settled down after the initial shock caused by the invasion.
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