Oil rises, but investors still bearish

Offshore rigs in Louisiana, the United States. Crude drillers in the US have added rigs for a 23rd straight week, according to last week's data, adding to concerns that the global oil supply will continue to swell despite output cuts by Opec.
Offshore rigs in Louisiana, the United States. Crude drillers in the US have added rigs for a 23rd straight week, according to last week's data, adding to concerns that the global oil supply will continue to swell despite output cuts by Opec.PHOTO: AGENCE FRANCE-PRESSE

NEW YORK • Oil trimmed its biggest monthly decline in almost a year while hedge funds tempered their outlook for prices.

Though oil rose as much as 1.4 per cent in New York yesterday, it is heading for the biggest monthly drop since July last year as global supply swells. Commodity Futures Trading Commission (CFTC) data last Friday showed money managers cut their net-bullish positions on West Texas Intermediate (WTI) to the lowest in 10 months during the week ended June 20 and boosted wagers on falling prices.

Oil in New York and London tumbled into a bear market last week on concerns that expanding global supply will counter the impact of output cuts from the Organisation of Petroleum Exporting Countries and its partners including Russia. United States crude drillers added rigs for a 23rd straight week, the longest stretch in three decades, according to data last Friday from Baker Hughes.

Mr Kerry Craig, global markets strategist for JPMorgan Asset Management, said in a Bloomberg television interview: "There is scope for oil markets to tighten over the rest of the year. As those prices stay weak, certainly some of those companies will start adjusting their outlook for capex and investment and that slowly will start to bring rebalance into the market."

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WTI for August delivery climbed as much as 59 US cents to US$43.60 a barrel on the New York Mercantile Exchange, and was at US$43.47 at 1.58pm in Hong Kong. Total volume traded was about 56 per cent above the 100-day average. The contract is up a third session after the 14-day relative strength index signalled it may be oversold. Prices are down about 10 per cent this month.

Brent for August settlement gained as much as 62 US cents, or 1.4 per cent, to US$46.16 a barrel on the London-based ICE Futures Europe exchange. Front-month prices lost 3.9 per cent last week. The global benchmark crude traded at a premium of US$2.56 to WTI.

Money managers' WTI net long positions, the difference between wagers on a price increase and bets on a decline, fell by 60,556 to 134,742 contracts, CFTC data showed. Short positions expanded by 34 per cent to 166,734, the most since August, and longs slid to the lowest in almost eight months.

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A version of this article appeared in the print edition of The Straits Times on June 27, 2017, with the headline 'Oil rises, but investors still bearish'. Print Edition | Subscribe