LONDON (Reuters) - Hedge fund managers cut short positions in petroleum last week amid slow vacation trading and continued conflicting signals about the health of the economy and the outlook for oil supply.
They and other money managers increased their net long position in the six most important petroleum futures and options contracts by 8 million barrels in the week to Aug. 20.
Portfolio managers were net buyers of NYMEX and ICE WTI (+18 million barrels), U.S. heating oil (+2 million) and European gasoil (+1 million) but sold Brent (-7 million) and U.S. gasoline (-5 million).
Buying was mostly driven by the covering of previous short positions rather than the initiation of new long ones, according to an analysis of regulatory and exchange data.
Funds cut short positions by 34 million barrels, including 39 million barrels in NYMEX and ICE WTI.
Fund buying of WTI seems to have been driven mostly by local factors, principally the commissioning of new pipelines, easing congestion and pressure on prices in the Permian region of Texas and New Mexico.
Hedge fund positioning is broadly neutral, with the fund community holding a dynamic long position (excluding structural longs and shorts) of just 60 million barrels.
There is plenty of scope for fund managers to add to long positions if fears about a global recession prove unfounded - or increase short positions if the economic outlook deteriorates.
Net positions have changed relatively little since the middle of June, partly because senior staff are on holiday over the summer, and partly because of uncertainty about the macro outlook.
Few changes are likely until the trajectory of the economy is clearer.
John Kemp is a Reuters market analyst. The views expressed are his own.
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Editing by Jan Harvey