A flow of funds explanation of oil prices… Reuters

by Jim Colburn • Tuesday, August 23, 2016

Reuters’ John Kemp uses flows of hedge funds to explain recent oil price movement here: http://www.reuters.com/article/us-oil-global-kemp-idUSKCN10Y030

Here are some highlights:

“Hedge funds executed one of the fastest U-turns on record this month as managers turned from super-bearish to cautiously bullish about the outlook for oil prices.”

“Most of the adjustment has come from the short side of the market, where hedge fund managers convinced that oil prices would fall further were wrong-footed by the sudden rally. Short positions were reduced by 114 million barrels (31 percent) between Aug. 2 and Aug. 16.”

“The furious race to buy back short positions sent prices higher. Front-month Brent futures prices jumped from $41.50 a barrel on Aug. 2 to $49.23 on Aug. 16 and continued rising to reach $50.88 on Aug. 19 for an increase of more than 20 percent.”

“Market chatter about a possible production freeze after next month’s meeting of OPEC and non-OPEC oil ministers in Algeria fueled a recoil that would probably have happened in any event.”




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