Saudi attacks leave hedge funds unmoved despite battle of the bots

LONDON: Hedge fund managers remain cautious about the outlook for oil prices despite a short-term surge following the recent attacks on Saudi Arabia’s oil installations. Amid record trading volumes, oil prices posted a record one-day rise on Sept. 16, the first trading day after the attacks. However, most of this was probably attributable to short-term computerised market-making programs (“bots”) taking intra-day positions rather than fund managers shifting their strategic view. Prior to the attacks, hedge fund managers had increased their bullish positioning in petroleum significantly as hopes rose for a trade truce between China and the United States.

But the attacks themselves have not added much to this economy-driven relief rally with the oil price rise flushing out some of the weaker bearish shorts but doing little to encourage the creation of new bullish long positions.

Hedge funds increased their net long position in petroleum futures and options by just 23 million barrels in the week to Sept. 17, an unexceptional amount and down from an increase of 122 million barrels the previous week. Across the six most important petroleum futures and options contracts, portfolio managers reduced short positions by 17 million barrels but added just 5 million barrels of new long positions.

Funds were net sellers of ICE Brent (-9 million barrels) but buyers of NYMEX and ICE WTI (+11 million barrels), US gasoline (+8 million), US diesel (+5 million) and European gasoil (+8 million). —Reuters