Oil prices stall as short-covering rally is completed: Kemp

Oil prices stall as short-covering rally is completed: Kemp

LONDON - Investors finished covering their short positions in petroleum last week, after Saudi Arabia and its allies in OPEC⁺ surprised traders by announcing an unexpected cut in their output target at the start of April.

Hedge funds and other money managers purchased the equivalent of 36 million barrels in the six most important petroleum futures and options contracts over the seven days ending on April 11.

Purchases over the three most recent weeks totalled 225 million barrels, among the largest increases over any three-week period in the last decade.

As a result, fund managers held a combined position of 515 million barrels (34th percentile for all weeks since 2013) on April 11, up from just 289 million barrels (6th percentile) on March 21.

Bullish long positions outnumbered bearish short ones by a ratio of 5.13:1 (66th percentile) up from 2.16:1 (16th percentile) three weeks earlier.

But the pace of buying slackened noticeably last week as most of the short positions that existed in late March had been closed out.

Short positions were trimmed by just 9 million barrels over the seven days ending on April 11, compared with 67 million in the week ending on April 4 and 48 million in the week to March