Benchmark crude oil prices have risen to the highest level for three months after the extension of production cuts by Saudi Arabia and its allies in OPEC⁺ sparked a rush to cover bearish short positions by investors.
Hedge funds and other money managers purchased the equivalent of 52 million barrels in the six most important petroleum futures and options contracts over the seven days ending on July 25.
Saudi Arabia’s output cut coupled with increased optimism about the prospects for an economic soft landing in the United States lifted some of the pessimism that had depressed WTI positions. Across WTI and Brent, the combined position increased to 374 million barrels on July 25, up from a record low of just 205 million barrels on June 27.Over the same four weeks, position-building was also evident in contracts tied to the price of refined fuels with a particular focus on middle distillates .
European gas oil futures and options have experienced an especially rapid increase in positions over the last four weeks . But inventories are well below the long-term seasonal average and supplies will tighten rapidly if the U.S. economy expands again soon after a soft landing.Portfolio investors are trying to become bullish about U.S. natural gas despite inventories remaining stubbornly above the long-term average and only slight signs of the surplus eroding.
Working gas inventories in underground storage were still +248 billion cubic feet above the prior 10-year seasonal average on July 21.
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