Industrial foreign exchange: short cover to promote the purchase of 73 million barrels of crude oil! Saudi Arabia officially cut production?

With Saudi Arabia unilaterally cutting production, removing the downside risk to oil prices from the previous slowdown in major economies, portfolio investors have re-entered the oil market.

In the seven days ended July 11,Hedge funds and other fund managers bought the equivalent of 115 million barrels of crude oil in the six most important oil futures and options contracts。

This is one of the largest increases in the past 10 years (the 14th largest increase in 539 weeks since 2013).Indicates a significant adjustment in traders' assessment of the risk balance。

Short covering drives crude oil buying

In the most recent week, funds were major buyers of Brent crude oil (+ 48 million barrels), WTI crude oil (+ 33 million barrels), European gasoline (+ 17 million barrels), US gasoline (+ 12 million barrels) and US diesel (+ 5 million barrels).

In all six contracts,The fund has bought 163 million barrels of crude oil in the last two weeksEarlier, Saudi Arabia extended the 1 million barrels per day production cut agreement by one month.

On July 11, total holdings increased from 282 million barrels (5th percentile) on June 27 to 445 million barrels (24th percentile for all weeks since 2013).

The ratio of bullish long positions to bearish short positions increased from 1.95:1 (10th percentile) to 2.98:1 (30th percentile).。

Of the 163 million barrels of crude oil, the increase in holdings was mainly crude oil, which increased by 134 million barrels, while refined oil increased by 29 million barrels. Among them, short position covering drove the purchase of 73 million barrels of crude oil, while the new long position increased the position of 89 million barrels.

The short covering of crude oil is consistent with Saudi Arabia's extension of production cuts, both reducing downside price risks from slowing economic growth. Fund managers are not yet bullish on the outlook for oil prices, but the cuts ease the extreme pessimism that weighed on the market at the end of June.

Natural gas net long position up nearly 10 times from a month ago

Hedge funds and other fund managers bought futures and options equivalent to 137 billion cubic feet of U.S. natural gas prices in the seven days ended July 11.

Funds have been buying for the last five weeks.A total of 822 billion cubic feet of natural gas has been purchased since June 6。

They have accumulated a net long position of 743 billion cubic feet (the 47th percentile for all weekly data since 2010).That's well above the 79 billion cubic feet on June 6 (29th percentile) and the 106.10 billion cubic feet on January 31 (7th percentile).

Fund managers seem to expect future tightening in the US domestic marketAlthough that has not yet happened.

Due to the fact that the real price of natural gas has been at the bottom tenth since 1990, and the steady decline in the number of active oil and gas rigs, most traders now expect the gas market to tighten in the winter of 2023-2024.