Expanding U.S. oil supplies and production spurred hedge funds and other speculators to cut record bets on rising West Texas Intermediate crude prices.
Money managers reduced their net-long position by 5.3 percent in the week ended March 11, the first decline in eight weeks, U.S. Commodity Futures Trading Commission data show. Long positions fell 2.9 percent and shorts rose for a third week.
WTI futures fell to a one-month low in the report week, sliding below $100 a barrel on the New York Mercantile Exchange. Inventories advanced for an eighth week in the seven days ended March 7 as crude production increased to the highest level since 1988 and refiners processed the least oil since October.
“Production is at multidecade highs,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Rising inventories created selling pressure and drove the longs out of the market.”
Crude dropped $3.30, or 3.2 percent, to $100.03 on the Nymex in the period covered by the CFTC report, the lowest settlement since Feb. 11. Futures retreated to as low as $99.32 on March 11.
WTI dropped 0.8 percent to $98.08 today on speculation that U.S. and European Union sanctions against Russia are unlikely to disrupt oil shipments. A referendum in Crimea yesterday set in motion the process for the Black Sea peninsula to leave Ukraine and join Russia.
U.S. stockpiles increased by 19.8 million barrels, or 5.6 percent, in the eight weeks ended March 7 to 370 million barrels, the highest level since Dec. 13, according to the Energy Information Administration.
Inventories rose as domestic production climbed to 8.18 million barrels a day in the week ended March 7, the most since July 1988. Refineries processed 15 million barrels a day, the least since Oct. 18. The operating rate dropped to 86 percent of capacity as companies retooled plants before gasoline demand picks up with warmer weather.
Maintenance is scheduled to reduce refining capacity by about 1.3 million barrels in March and 800,000 barrels in April, according to Energy Aspects Ltd., a research company in London.
“Demand is usually a little weak in the spring and refiners do maintenance to get ready for summer demand,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Work started at Phillips 66’s Bayway, New Jersey, refinery, the only plant in the New York Harbor region. Irving Oil is carrying out six weeks of work on several units at its Saint John refinery in New Brunswick. The refinery sends more than half its output to the U.S. Northeast.
BP Plc’s Whiting, Indiana, plant, the largest in the U.S. Midwest, is carrying out planned maintenance on a fluid catalytic cracker.
Net longs on WTI reached a record in the week ended March 4 as inventories fell at Cushing, Oklahoma, the delivery point for WTI futures. TransCanada Corp. began operating the southern section of Keystone XL pipeline in January to move oil to the Gulf Coast.
“It’s just a transfer of oil,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Refineries are not using the crude.”
Net-long positions in WTI crude held by money managers, including hedge funds, commodity pools and commodity-trading advisers, fell by 18,374 futures and options combined to 328,095. Long positions dropped by 10,732 to 357,628, while shorts increased by 7,642 to 29,533.
Bullish bets on gasoline fell by 1.4 percent to 58,168 futures and options. Futures slid 1.83 cents to $2.967 a gallon on the Nymex in the reporting period and fell 2.7 percent to $2.8811 today.
Regular gasoline at the pump, averaged nationwide, rose 0.4 cent to $3.521 a gallon yesterday, the highest level since September, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.
Money managers’ bullish wagers on U.S. ultra low sulfur diesel slipped 22 percent to 33,035. The fuel fell 7.97 cents to $2.961 a gallon in the report week and dropped 1.8 percent to $2.8908 today.
Net-long wagers on four U.S. natural gas contracts climbed by 1.7 percent to 418,828. 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.
Natural gas futures fell 6.2 cents, or 1.3 percent, to $4.605 per million British thermal units on Nymex during the report week. They rose 2.5 percent to $4.536 today.
“There is a lot of supply out there and people are hesitant to be long,” said Phil Flynn, a senior market analyst at the Price Futures Group in Chicago. “It’s probably going to make prices go down even further.”