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Hedge funds and other money managers purchased the equivalent of 47 million barrels of petroleum-related futures and options in the week to Oct. 11. Purchases came after OPEC+ announced on Oct. 5 the group would reduce its combined output target by 2 million barrels per day from November. There was also strong buying of middle distillates (+14 million barrels), including European gas oil (+7 million) and U.S. diesel (+6 million), but sales of U.S. gasoline (-3 million). The total position in mid-distillates has risen to 70 million barrels (58th percentile) from a low of 45 million (40th percentile) two weeks ago. Related columns:- Diesel's gloomy message for the global economy (Reuters, Oct. 14)- OPEC+ cut draws hedge funds back into the oil market (Reuters, Oct. 10)- Oil investors ready for recession (Reuters, Oct 3)- Hedge funds dump distillates as recession risks intensify (Reuters, Sept. 26)John Kemp is a Reuters market analyst.

EU distillate inventories were just 360 million barrels at the end of September, the lowest seasonal level since 2004. The global petroleum and refining system has proved unable to keep up with rapid growth in fuel consumption as a result of the manufacturing and freight-led recovery after the coronavirus pandemic. In any event, accelerating refinery processing will simply push the shortage upstream from the fuel market to the crude market. But with spare capacity almost exhausted, a recession is the most likely route to rebalancing the distillate market in particular and the petroleum market in general. Related columns:- OPEC+ risks overtightening the oil market (Reuters, Oct. 12).

Register now for FREE unlimited access to Reuters.com RegisterWHY ARE REFINERY AND FUEL DEPOT WORKERS STRIKING? Middle distillates such as diesel and gas oil are primarily used in freight transport, manufacturing, farming, mining, and oil and gas extraction. The French refinery outages are tightening European supplies and reverberating through global markets. Meanwhile, northwest European diesel barge profit margins hovered near record highs hit on Monday. read moreUncertainty over how long the French strikes will last has lifted European diesel spreads relative to crude just as Western sanctions against Russia are driving prices still higher.

Fund buying concentrated on crude (+46 million barrels) rather than fuels (+15 million) and came ahead of a decision by OPEC+ on Oct. 5 to cut the group's combined output allocations by 2 million barrels per day. Register now for FREE unlimited access to Reuters.com RegisterPortfolio managers purchased Brent (+27 million barrels), NYMEX and ICE WTI (+19 million), European gas oil (+6 million), U.S. diesel (+6 million) and U.S. gasoline (+4 million). As a result, the combined crude position climbed to 360 million barrels (18th percentile for all weeks since 2013) up from 314 million barrels (10th percentile) the previous week. The combined distillate position increased to 56 million barrels (45th percentile) from 45 million (40th percentile) the week before. Related columns:- Oil investors ready for recession (Reuters, Oct. 3)- Hedge funds dump distillates as recession risks intensify (Reuters, Sept. 26)- Recession will be necessary to rebalance the oil market (Reuters, Sept. 22)- Oil prices and financial markets brace for recession (Reuters, Sept. 15)John Kemp is a Reuters market analyst.

Hedge funds and other money managers sold the equivalent of 8 million barrels in the six most important petroleum-related futures and options contracts in the week to Sept. 20. Funds have sold a total of 186 million barrels over the 16 weeks since the start of June, according to records published by ICE Futures Europe and the U.S. Commodity Futures Trading Commission. (Chartbook: https://tmsnrt.rs/3Stv0XG)The most recent week saw purchases of Brent (+6 million barrels), NYMEX and ICE WTI (+3 million) and U.S. gasoline (+2 million) but sales of U.S. diesel (-3 million) and European gas oil (-15 million). Middle distillates such as diesel and gas oil are mostly used in freight transportation, manufacturing and mining, so they are heavily geared to the business cycle. Fund managers have cut their position in mid-distillates in each of the last three weeks by a total of 39 million barrels as fears of a recession have intensified.

☆ U.S. crude seen higher last week, gas and distillates inventories fall: Reuters poll
▼ + stars: | 2022-09-19 | by ( ) www.reuters.com time to read: +2 min

REUTERS/Bing GuanRegister now for FREE unlimited access to Reuters.com RegisterSept 19 (Reuters)- U.S. crude oil stockpiles are expected to have risen last week, while gas and distillate inventories were seen lower, a preliminary Reuters poll showed on Monday. Five analysts polled by Reuters estimated on average that crude inventories rose by around 2 million barrels in the week to Sept. 16. read moreAnalysts estimated stockpiles of gasoline (USOILG=ECI) fell by about 900,000 barrels last week. Distillate inventories (USOILD=ECI), which include diesel and heating oil, were expected to have dropped by 500,000 barrels last week. The rate of refinery utilization (USOIRU=ECI)was seen 0.1% lower than 91.5% of total capacity for the week ended Sept. 9, the poll found.

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