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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