Oil Steadies After Fund Exit Triggers Fifth Weekly Decline
Oil Edges Higher in Bear Market as Hedge Fund Optimism Wanes
(Bloomberg) -- Oil steadied after a sell-off among hedge funds triggered crude’s fifth straight weekly loss amid concerns a stubborn global surplus isn’t going away any time soon.
Prices rose 0.9 percent in New York. Speculators cut their net-long position in U.S. benchmark futures to the lowest in 10 months last week, and in North Sea Brent to the lowest since January 2016, exchange data showed. JPMorgan Chase & Co. cut its price forecasts as inventories remain plentiful.
"We kind of hit bottom after this long drop," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. "It makes sense that we’re either going to stabilize or be up a little unless some news comes out."
Oil has tumbled more than 20 percent from its peak, entering a bear market last week, on concerns that expanding global supply will undermine the impact of output cuts from the Organization of Petroleum Exporting Countries and partners including Russia. U.S. crude drillers added rigs for a 23rd straight week, the longest stretch in three decades, according to data released on Friday by Baker Hughes Inc.
WTI for August delivery rose 37 cents to settle at $43.38 in New York after climbing as much as 64 cents earlier. Prices are down about 10 percent this month.
Brent for August settlement climbed 29 cents to close at $45.83 a barrel on the London-based ICE Futures Europe exchange. Front-month prices lost 3.9 percent last week. The global benchmark crude traded at a premium of $2.45 to WTI.
Commodity Futures Trading Commission data on Friday showed money managers cut their net-bullish position on WTI to the lowest in 10 months during the week ended June 20 and boosted wagers on falling prices to the most since August. Data from ICE Futures Europe on Monday showed that speculators cut their net-long position in Brent by 19 percent to the lowest in 17 months.
“There is scope for oil markets to tighten over the rest of the year,” Kerry Craig, global markets strategist for JPMorgan Asset Management, said in a Bloomberg television interview. “As those prices stay weak, certainly some of those companies start adjusting their outlook for capex and investment, and that slowly does start to bring rebalance into the market.”
Oil-market news:
- High global inventories will keep oil below $60 a barrel until at least 2021, Scott Sheffield, chairman of Pioneer Natural Resources Co., said Monday in Washington.
- Enterprise Products Partners LP resumed service on its Seaway Legacy crude pipeline Sunday after repairs to a leak discovered Thursday were completed, according to person familiar with matter.
- Enquest Plc has started pumping oil from the Kraken field in the U.K. North Sea.
--With assistance from Ben Sharples and Grant Smith
To contact the reporter on this story: Meenal Vamburkar in New York at mvamburkar@bloomberg.net.
To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada