Oil output restraint draws hedge fund buying: Kemp

Oil output restraint draws hedge fund buying: Kemp

(John Kemp is a Reuters market analyst. The views expressed are his own) LONDON- Portfolio managers increased their positions in petroleum last week, reversing roughly half the sales over the previous three weeks, as benchmark oil prices started to break up through the recent ceiling. Hedge funds and other money managers purchased the equivalent of 40 million barrels in the six most important futures and options contracts in the week to June 1, after selling a total of 74 million over the previous three weeks. Purchases were weighted towards crude oil, especially NYMEX and ICE WTI (+21 million barrels), with smaller buying in Brent (+9 million barrels), according to position records published by regulators and exchanges. There was also significant buying in European gas oil (+13 million barrels) but only minor changes in U.S. gasoline (-1 million) and U.S. diesel (-2 million). The fact position-building is being led by crude rather than refined products suggests production controls rather than the recovery in consumption is the primary driver of higher prices at present. Fund managers are responding to signs of continued output restraint, especially from the U.S. shale sector, which is expected to lead to a further reduction in inventories over