11/25/2015

HedgefundsoilshortsreachpeakfortheyearFT.com

Lastupdated:November24,20153:39pm

Hedgefundsoilshortsreachpeakfortheyear
DavidSheppard

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AFP

HedgefundsbetsagainsttheoilpricehaverisentothehighestlevelthisyearaheadofnextweeksOpecmeeting,intheexpectation
thecartelsmostpowerfulmemberswillstickwiththeirpolicyofkeepingoutputhigh.
AworseningglobaloilgluthasseenspeculativefundsamassapositioninNewYorkandLondonequivalenttomorethan3.5daysof
globaloildemand,whichwillmakemoneyifthepricefallsfurther.
TheshortfuturesandoptionspositioninLondontradedNorthSeaBrentisthehighestsinceOctober
2014at141mbarrels,risingaquarterinthelastweek,whilebetsagainstUSbenchmarkWestTexasIntermediatehavejumpednearly
60percentsinceearlyOctobertoalmost200mbarrels.
FundsrenewedwillingnesstobetagainstoilseventualrecoverymaycauseconcernforOpecasitpreparestomeetinVienna,one
yearonfromtheSaudileddecisiontotargethighercostproducersbyrampingupsupply.Thatmovehasseenoilcollapsetoitslowest
pricesince2009,withlittlesignofanimminentrecovery.
Butthesizeoftheshortpositionisalsomakingtheoilmarketskittish,withtradersfearingasocalled
shortsqueezeshouldtheoilcartelspringanysortofsurprisenextFriday.
Oilpriceshavesurgedsofarthisweek,withBrentcruderising3.5percentonTuesdayto$46.50,after
TurkeyshotdownaRussianjetfighteritsaidhadviolatedTurkishairspace.
Thatfollowedagainofmorethan2percentonMondayaftertraderstriedtodecipherabriefstatement
fromSaudiArabiascabinetfollowingitsregularweeklymeeting.
WhatmanysawasastraightforwardreiterationofSaudislongheldofficialpositionthatitwillco
operatetostabilisethemarketonlyifcountriesoutsidethegroupalsoagreetocutproductionsent
othersscramblingtoclosetheirbearishbets,fearingashiftinthekingdomsstance.
Thekneejerkreactioninpricessuggestsamarketwherepositioningisshort,saidAmritaSen,chiefoil
analystatEnergyAspectsinLondon,addingthattheUSThanksgivingholidaywasalsolikelyreducingliquidity,increasingthe
likelihoodoflargermoves.
SaudiArabiahasalwaysmaintaineditwillnotreduceproductionunilaterallybutwillonlydosoifotherOpecandnonOpec
countriescollaborate.
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11/25/2015

HedgefundsoilshortsreachpeakfortheyearFT.com

Analystssaidthelargeshortpositionwasmakingsomenervousduetomemoriesofanear29percentpricespikeinlateAugust,
whichtookBrentfromasixyearlowof$42.23abarrelto$54.32inlessthanaweek.
Whilethepricerecoverywasshortlived,itfollowedshortsellerscashingintheirpositionsduringlightsummertrading.
[The]threedayjumpbackinAugusthasnotbeenforgotten,saidOleHansenatSaxoBank.
Otherssaidtradersmayneedtowaituntilthelatestexchangeandregulatorydataonspeculativepositioningisavailabletoseeiffunds
reallywerebehindthepricespikeonMonday.
SometranslationsoftheSaudicabinetstatementcarriedareferencetostabilisingnotjustoilmarketsbutprices,whichSaudioil
ministerAlialNaimihaspreviouslyemphasisedthisyearshouldonlybesetbysupplyanddemand.
IfRiyadhwaspreparedtotalkaboutoilpricesagainitcouldindicateasubtleshiftinemphasis,ifnotimmediatepolicy,traderssaid.
TheEnglishlanguagewebsiteofSaudiArabiasPressAgency,however,madenoreferencetopriceinthestatementitcarried.
OlivierJakob,consultantatPetromatrixinZug,Switzerland,saidhepreferredtokeepanopenmindaheadofOpecsmeeting,noting
thegrouphadsurprisedmarketsinthepast.
Thereisabearishconsensusbutweareatlowpricelevelsalready,MrJakobsaid.
[Thefundpositioning]doescreatethepotentialforasharpcorrection.AllyouneedisaslightshiftintonefromSaudiArabia.
AdditionalreportingbyAnjliRavalandNeilHume
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11/25/2015

HedgefundsoilshortsreachpeakfortheyearFT.com

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