HEDGE FUND'S SALE OF GASOLINE FASTEST SINCE 2006
Hedge funds sold gasoline at the fastest pace since October 2006, dumping 57 per cent of their bets on concern Europe's debt crisis would hurt energy demand, Bloomberg reported on Monday.
Speculative net-long positions in gasoline futures and options on the New York Mercantile Exchange tumbled to 14,228 in the week ended May 25, the lowest level since February 2007, according to the Commodity Futures Trading Commission's Commitments of Traders Report on May 28. Bullish bets are down by 80 per cent since setting a record 70,742 on May 4.
'Coming into the month of May the market was heavily skewed with record long positions that exhausted the flow of buying,' Tim Evans, an energy analyst at Citi Futures Perspective in New York, said. 'We're now much less vulnerable to a drop in prices and are in a good position to see prices rise. The hedge fund community is sitting on the sidelines,' he added.
Gasoline fell 16 per cent in May on concern the sovereign debt crisis in Greece will spread, undermining the recovery from the worst recession since World War II. Supplies of the motor fuel are 5.8 percent above the five-year average, and imports jumped by 32 per cent in the week ended May 21.
About 28 million people are on road trips during the US Memorial Day holiday, a jump of 5.8 per cent from a year earlier and the first increase since 2005, according to motoring club AAA, which calculates the period over five days ending today.
'The bulls had to throw in the towel,' Vice President of Research at PFGBest in Chicago, Mr. Phil Flynn, said. 'Commodity funds purchased gasoline in April and early May on expectations that a growing US economy would lead to increasing demand. Concerns about the Greece crisis has spread to the markets and changed these assumptions,' he added.
Hedge funds, commodity trading advisers and commodity pool operators, classified as managed money by the CFTC, decreased net-long positions in crude oil 17 per cent to 74,236, the lowest level since July. Wagers that prices will climb have tumbled 53 per cent in three weeks.
Crude oil dropped by 14 per cent through May 25 from a 19-month high of $87.15 a barrel May 3. Oil for July delivery fell 58 cents, or 0.8 per cent, to $73.97 a barrel May 28 on the Nymex, capping the worst month since December 2008.
'This shouldn't be a surprise given the recent activity in the financial markets,' Carl Larry, President of Oil Outlooks & Opinions LLC in Houston, Mr. Carl Larry, said. 'People are moving money around in an attempt to free up capital,' he added.
Supplies of oil and all petroleum-based fuels jumped to 1.82 billion barrels in the week ended May 21, the highest stockpiles on a seasonal basis based on Energy Department data back to 1990. Inventories of crude oil surged 2.46 million barrels to 365.1 million. It was the 16th gain in 17 weeks.