Hedge Funds Buy Oil Sensing Supply Shortage

U.S. crude inventories declining from a record before the Memorial Day weekend spurred speculators to increase bullish bets on oil for a second week.

Hedge funds raised their net-long position in benchmark West Texas Intermediate futures by 4.1 percent in the week ended May 20, U.S. Commodity Futures Trading Commission data show. Prices climbed to a one-month high.

Crude supplies fell the most in four months in the week ended May 16, the U.S. Energy Information Administration said. Refineries produced a record amount of gasoline before the holiday, the start of the summer driving season. AAA, the largest U.S. motoring group, expects it to be the busiest weekend since 2005. Today is Memorial Day in the U.S.

“The decline in crude stocks, particularly after weeks and weeks of build, gave the impetus higher to WTI prices,” Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy, said by phone on May 23. “The market chose to focus on the inventory figure for crude.”

WTI futures gained 74 cents to $102.44 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. They settled at $102.61 on May 19, the highest since April 21. Prices advanced 61 cents to $104.35 on May 23. The contract fell 0.3 percent today.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza