(John Kemp is a Reuters market analyst. The views expressed are
* Chart 1: tmsnrt.rs/2clxshx
* Chart 2: tmsnrt.rs/2cyquZ5
* Chart 3: tmsnrt.rs/2cyq6K7
* Chart 4: tmsnrt.rs/2cyqcBp
* Chart 5: tmsnrt.rs/2cly8na
* Chart 6: tmsnrt.rs/2clxxSu
By John Kemp
LONDON, Sept 12 Hedge funds tempered their
bullishness towards the entire petroleum complex during the
first week of September, according to positioning data from
regulators and exchanges.
Hedge funds and other money managers cut their combined net
long position in the three major Brent and WTI futures and
options contracts by 80 million barrels in the week ending Sept.
The decline was led by a big increase in short positions,
which rose by 56 million barrels, especially in the WTI
contracts, where short positions increased by 39 million
There was a more modest reduction in long positions, which
fell 23 million barrels, with almost all the long liquidation in
Brent, where long positions were down 20 million barrels.
Overall, the hedge funds' net long position in crude has
fallen by nearly 100 million barrels over the two most recent
weeks, partially reversing a build of 287 million barrels over
the three weeks before that (tmsnrt.rs/2cyquZ5).
The partial reversal reflects profit taking after Brent
prices surged by almost $10 per barrel, more than 23 percent, in
the first part of August as some of the previous record short
position was covered.
It also seems to reflect fresh short-selling in anticipation
that long liquidation would trigger a new round of price falls.
The more cautious hedge fund position on crude was echoed in
positions on U.S. gasoline blendstock and heating oil.
Hedge funds cut their net long position in gasoline by 5
million barrels and heating oil by 12 million barrels in the
week ending on Sept. 6 (tmsnrt.rs/2cyq6K7 and
Even after the recent adjustments, hedge fund positions
across the entire complex of crude, gasoline and heating oil are
still much more bullish than they were at the start of August.
Recent long liquidation and short sales may be just a minor
correction after the unprecedented short-covering rally last
month ("Oil prices surge as hedge funds reduce short positions",
Reuters, Aug. 22).
But with long positions still relatively high and short
positions relatively low there is potentially scope for the
correction to continue.
Since the start of 2015, hedge funds have accumulated and
then liquidated short positions in four distinct cycles that
have closely mirrored the fall and then rise of oil prices (tmsnrt.rs/2cly8na).
The critical question is whether the latest bout of short
selling marks the start of a new cycle, the fifth, or is merely
the continuation of cycle number four (tmsnrt.rs/2clxxSu).
(Editing by Susan Thomas)