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Speculators Boost Bullish U.S. Oil Wagers on Supply Drop: Energy

Photographer: Andrew Harrer/Bloomberg

Prices also gained as cold weather in the eastern U.S. drained stockpiles of distillate fuel, a category that includes heating oil and diesel. Close

Prices also gained as cold weather in the eastern U.S. drained stockpiles of distillate... Read More

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Photographer: Andrew Harrer/Bloomberg

Prices also gained as cold weather in the eastern U.S. drained stockpiles of distillate fuel, a category that includes heating oil and diesel.

Hedge funds became the most bullish on U.S. crude oil in more than five months as a new pipeline from Oklahoma to Gulf Coast refineries eased a supply bottleneck, driving prices above $100 a barrel.

Money managers increased net-long positions, or wagers on rising prices, for benchmark West Texas Intermediate crude by 11 percent in the week ended Feb. 11, U.S. Commodity Futures Trading Commission data show.

Short positions fell 34 percent, the biggest decline since March 2011, as the opening of the southern part of TransCanada Corp.’s (TRP) Keystone pipeline in January reduced supplies at Cushing, Oklahoma, the delivery point of WTI futures traded on the New York Mercantile Exchange. Prices also gained as cold weather in the eastern U.S. drained stockpiles of distillate fuel, a category that includes heating oil and diesel.

“Speculators were waiting to see what impact the opening of the Keystone pipeline would have on supplies at Cushing and now they have it,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Winter heating demand has been the other factor that’s been moving the market.”

Crude advanced $2.75, or 2.8 percent, to $99.94 a barrel on the Nymex in the report week. Futures topped $100 in intraday trading for the first time since Dec. 30 on Feb. 7. WTI rose 62 cents to $100.92 a barrel at the 1:15 p.m. close of electronic trading in New York.

Distillate Decline

Futures began the reporting period with a gain of 19 cents to $97.38 a barrel on Feb. 5 after a U.S. government report showed that stockpiles of distillate fuel dropped for a fourth week because of cold weather. Inventories of distillate fell 2.36 million barrels to 113.8 million in the week ended Jan. 31, the Energy Information Administration said.

WTI rose 0.5 percent to at $97.84 on Feb. 6 as applications for U.S. unemployment benefits fell for the first time in three weeks. Jobless claims dropped by 20,000 to 331,000, the Labor Department said.

Crude surged above $100 the next day for the first time this year after weaker-than-forecast jobs growth triggered speculation about the outlook for Federal Reserve stimulus. The Labor Department said payrolls gained 113,000 in January, less than the median estimate of 180,000 in a Bloomberg survey of economists. Prices settled at $99.88 and reached $100.21 after the close of floor trading.

Fed Tapering

Oil rose 18 cents to $100.06 a barrel on Feb. 10, the highest settlement since Dec. 27. Futures fell 12 cents to $99.94 on Feb. 11 amid speculation that a government report would show that nationwide crude supplies rose and as Federal Reserve Chairman Janet Yellen said she expected the Fed to continue curbing asset purchases.

WTI climbed as much as 0.5 percent to $100.60 after the close of floor trading on Feb. 11 as an industry group, the American Petroleum Institute, said that Cushing stockpiles tumbled the prior week by 2.49 million barrels.

Futures advanced 0.4 percent to $100.37 on Feb. 12 after the EIA reported that Cushing supplies dropped to 37.6 million barrels in the week ended Feb. 7, the lowest level since Nov. 1.

“The CFTC data reflects markets activity,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Oil is back above $100 and poised to move higher.”

Crude Positions

Net-long positions in WTI crude increased by 30,090 futures and options combined to 306,021, the highest level since the week ended Aug. 30. Long positions rose by 17,783 to 329,612, the highest level since September, while shorts dropped 12,307 to 23,591.

Money managers’ bullish wagers on ultra low sulfur diesel, a surrogate for heating oil, rose by 2,215 futures and options combined, or 8.3 percent, to 29,076.

The fuel increased 4.52 cents, or 1.5 percent, to $3.0281 a gallon in the report week.

January was the coldest start of the year since 2001, the National Oceanic and Atmospheric Administration said Feb. 13. A weather system last week roared out of the South, killing at least 25 people, according to the Associated Press. More than 14,000 flights were scrubbed last week, said FlightAware, a Houston-based tracking service.

“Weather is having a huge impact on the market,” Flynn said. “Diesel has been very active.”

Net-long bets on gasoline held by money managers, including hedge funds, commodity pools and commodity-trading advisers, declined by 132 futures and options combined, or 0.5 percent, to 25,603.

Gasoline Prices

Futures rose 14.95 cents, or 5.7 percent, in the reporting period to $2.7526 a gallon on the Nymex. Prices rose 2.81 cents, or 1 percent, to $2.8053 Feb. 14, the highest settlement since Dec. 27.

Regular gasoline at the pump, averaged nationwide, rose 0.6 cent to $3.358 a gallon yesterday, the highest level since Oct. 17, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.

Hedge funds and other money managers increased net bullish bets on Brent crude by 30 percent to 109,223 lots in the week ended Feb. 11, the highest since Dec. 31, according to data from ICE Futures Europe.

Net-long wagers on four U.S. natural gas contracts gained 23,692 futures equivalents, or 6 percent, to 421,137.

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

Natural gas futures dropped 55.1 cents, or 10 percent, to $4.824 per million British thermal units on the Nymex during the report week.

“Crude net-long positions are approaching the last peak, which was reached in July,” said Tim Evans, an energy analyst at Citi Futures in New York. “Prices should head a bit higher and then we should see an unwinding of some of these long positions.”

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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