Oil prices have pulled themselves back to neutral ground this morning after surviving a near-collapse experience last week. Oil seems to be benefiting from the latest disruption in Libya as the country’s largest field was forced to close due to a pipeline shut down. Refined products meanwhile are sliding back into the red as the East Coast reopens for business after one demand-sapping storm just in time for another one to blow in mid-week.
Money managers added to their net long positions across the board last week with Brent, WTI, ULSD and RBOB all seeing an increase in speculative bets on higher prices. The weekly data is compiled as of Tuesday, meaning that the money managers were likely adding these positions during the prior week’s run up and probably did not enjoy the selloff over the balance of the week. While the early February sell-off did cause the speculative category of traders to reduce their record net-long holdings, the overall positions remain well above levels we’ve seen in years past.
On the flip side, swap dealers continue to hold near-record net short positions in WTI in what is presumed to be holdings of forward hedges on behalf of oil producers. If the money managers are simply holding the other side of that trade on their books, maybe the speculative net length is not the ticking time bomb many believe it to be. Then again, we’ve seen how extreme positions held by funds can be a precursor to big moves in the past, so this story should continue to be watched closely.
One more oil rig was put to work last week according to Baker Hughes, bringing the total count in the US to 800, the first time since April 2015 that this many rigs have been active. While near term there seems to be more upside potential for US Oil production, a longer term risk to the pipeline assets needed to take that oil to market has been highlighted in the steel tariff talks.