Hedge funds reduced their bets on rising West Texas Intermediate crude prices by the most in almost nine months as U.S. inventories climbed and concern eased that sanctions against Russia will disrupt oil supplies.
Money managers cut net-long positions by 25,775 futures and options combined in the week ended March 18, U.S. Commodity Futures Trading Commission data show. It was the biggest drop since June. Long positions slumped 6.6 percent after reaching a record earlier in the month. Shorts increased 7.6 percent.
Crude supplies advanced for a ninth week in the seven days ended March 14 to a three-month high as production increased to the most in 26 years and refineries processed the least oil since October. The U.S. and European Union announced sanctions after voters in Crimea chose to leave Ukraine and become part of Russia, the world’s biggest energy exporter.
“Market players are stepping back and the record longs continue to be shed,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Overall inventories have increased a lot as refineries are doing maintenance.”
Crude dropped 33 cents to $99.70 on the New York Mercantile Exchange in the period covered by the CFTC report. It ended below $100 in each of the five days and slid to $97.99 on March 12, the lowest settlement since Feb. 6.
Prices rose 0.6 percent to $99.46 on March 21 after Russian President Vladimir Putin signed legislation to absorb Crimea, brushing aside sanctions. WTI rose 7 cents to $99.53 a barrel at 9:15 a.m. in London today.
U.S. stockpiles increased by 25.6 million barrels, or 7.3 percent, in the nine weeks ended March 14 to 375.9 million barrels, the highest level since Nov. 29, according to the U.S. Energy Information Administration.
Domestic production climbed to 8.22 million barrels a day in the week ended March 14, the most since May 1988. Refineries processed 15 million barrels a day, the least since Oct. 18. The operating rate dropped to 85.6 percent of capacity as companies retooled plants before gasoline demand climbs with warmer weather.
Phillips 66 said on March 17 that its Los Angeles refinery was conducting planned maintenance. The plant has a capacity of 139,000 barrels a day. Marathon Petroleum Corp. (MPC) was performing planned work at the 206,000-barrel-a-day refinery at Robinson, Illinois, a person familiar with the matter said on March 13.
Suncor Energy Inc. said on March 14 that it has begun maintenance at the Commerce City, Colorado, plant. The refinery near Denver has a capacity of 103,000 barrels a day.
“It’s the refinery maintenance season,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The concern is definitely on the U.S. economy and the fundamentals.”
President Barack Obama authorized sanctions against officials and businessmen close to Putin as Russia completed its annexation of Crimea. Among the targets was billionaire Gennady Timchenko, a co-founder of Gunvor Group Ltd., an oil-trading firm. The U.S. named Putin as an investor in the company. Gunvor said Putin has never held a stake.
Timchenko sold his stake in the company to partner Torbjorn Tornqvist, according to a company statement. The transaction took place March 19, the day before the U.S. Treasury Department imposed sanctions on the 61-year-old billionaire.
Russia produced 10.4 million barrels a day of oil in 2012 and exported 7.4 million, according to the EIA. The southern part of the Druzhba line carries 300,000 barrels a day of Russian crude through Ukraine to refineries in Hungary, Slovakia and the Czech Republic.
Net-long positions in WTI crude held by money managers, including hedge funds, commodity pools and commodity-trading advisers, fell by 7.9 percent to 302,320. Long positions dropped to 334,104, while shorts increased to 31,784.
Bullish bets on gasoline decreased 1.4 percent to 57,343 futures and options. Futures slid 6.42 cents, or 2.2 percent, to $2.9028 a gallon on the Nymex in the reporting period and gained 0.4 percent to $2.9079 March 21. They were at $2.9043 today.
Regular gasoline at the pump, averaged nationwide, rose 0.2 cent to $3.525 a gallon on March 22, the first gain in three days, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.
Money managers’ bullish wagers on U.S. ultra low sulfur diesel decreased 30 percent to 23,109. The fuel fell 4.55 cents to $2.9155 a gallon in the report week and dropped 12 cents to $2.9201 March 21. It was at $2.9140 today.
Net-long wagers on four U.S. natural gas contracts dropped 2.4 percent to 408,941. 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 14.9 cents, or 3.2 percent, to $4.456 per million British thermal units on Nymex during the report week. They slid 1.3 percent to $4.313 on March 21 and were at $4.332 today.
“The fundamentals are weak for oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “So far, Russia hasn’t been a big threat to oil supplies.”