MELBOURNE -- Hedge funds reduced bullish crude bets for the second time in three weeks as surging U.S. output increased supplies in the world’s biggest oil-consuming country. Money managers cut net-long positions, or wagers on rising prices, by 6.1 % in the seven days ended Feb. 19, the Commodity Futures Trading Commission’s Commitments of Traders report on Feb. 22 showed. It was the biggest decline since the week ended Dec. 11. West Texas Intermediate, the U.S. benchmark, has dropped 4.5 % this month, after jumping 6.2 % in January, as supplies ballooned. Stockpiles have climbed to the highest level since July as domestic production from shale formations helped send output to levels not seen since 1992, according to the Energy Information Administration, the Energy Department’s statistical arm. “This report confirms that the rally has run its course,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Feb. 22. “More declines are sure to come.” WTI fell 85 cents, or 0.9 %, to $96.66 a barrel on the New York Mercantile Exchange in the week covered by the report. Futures tumbled $4.26 a barrel Feb. 20 and 21, the biggest two-day decline since Oct. 3. Oil rose 0.3 % to $93.13 on Feb. 22. Prices are up 1.4 % this year. Analyst Estimates The average of 19 estimates made by analysts since Jan. 1 and compiled by Bloomberg shows U.S. benchmark crude at $92.04 a barrel in the first quarter. Crude dropped 0.5 % on Feb. 13 after Iran said it was nearing agreement with nuclear inspectors and as the EIA said U.S. output rose to the highest level in 20 years. Iran’s state-run Press TV quoted Ali Asghar Soltanieh, the country’s envoy to the International Atomic Energy Agency, as saying that a basic accord had been reached. U.S. production climbed to 7.06 million barrels a day in the week ended Feb. 8, the highest level since December 1992, according to the EIA. Crude stockpiles rose 560,000 barrels to 372.2 million. The boom in oil and natural gas production helped the U.S. meet 84 % of its energy needs in the first 10 months of the year, on pace to be the highest annual level since 1991, EIA data show. Futures climbed 0.3 % on Feb. 14 as United Nations nuclear inspectors failed to reach a deal with Iran and fewer Americans than forecast filed applications for jobless benefits. Iran Inspections UN officials said they didn’t secure an agreement that would allow access to atomic facilities and couldn’t settle on a date for another meeting, indicating that sanctions on the Persian Gulf country will remain in place. Gains accelerated after a report showed unemployment claims fell by 27,000 last week, signaling fuel demand may grow. Crude fell 1.5 % to $95.86 on Feb. 15, after rising as high as $97.47, as U.S. industrial production unexpectedly shrank and euro-area exports declined the most in five months. Futures touched the intraday low in late afternoon as equities fell on news that Wal-Mart Stores Inc. had the worst sales start to a month in seven years. “It appears that patience has run out after another failed assault of $98,” said Kilduff. The contract rose 0.8 % on Feb. 19 after operators said the flow of crude on the Seaway pipeline to refineries along the Gulf of Mexico will climb and as the Standard & Poor’s 500 Index surged to a five-year high. Seaway Pipeline WTI increased as Enterprise Products Partners LP said Seaway volumes will average 295,000 barrels a day between February and May, up from 180,000 barrels in January. Traders are counting on the pipeline to cut a historic supply glut at Cushing, Oklahoma, where Nymex futures are delivered. The premium of Brent oil traded in London to WTI slipped to $20.42 a barrel on Seaway and proposed changes to North Sea pricing formulas. The gap grew to $23.18 on Feb. 8, the most this year. Prices for the April contract declined 2.5 % to $92.84 on Feb. 21 after the EIA reported that stockpiles rose 4.14 million barrels to 376.4 million in the seven days ended Feb. 15, the highest level since July. Production rose to 7.12 million barrels a day, the most since August 1992, according to the EIA. Net-long positions in U.S. oil held by money managers, including hedge funds, commodity pools and commodity trading advisers, retreated by 13,533 to 208,001 futures and options combined. “This report shows the market in transition about how and when to scale back,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone Feb. 22. “Buying pressure has eased and maybe switched to selling pressure.” Heating Oil In other markets, money managers bolstered wagers on U.S. heating oil to the highest level since at least 2006. Net-long positions climbed 4,780 futures and options combined, or 9.9 %, to 52,961, the CFTC report showed. Heating oil fell 1.7 % to $3.1806 a gallon in the week covered by the report. It settled at $3.1042 on Feb. 22. “The heating oil contract is basically a diesel contract and if you believe in the recovery of global demand, diesel ought to be a big bet for the funds,” Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York, said by phone on Feb. 22. Money managers increased bullish bets on U.S. gasoline prices for a fifth week, boosting them 0.5 % to 90,542. The fuel climbed 7.09 cents, or 2.3 %, to $3.1212 a gallon on the Nymex in the report week. The contract settled at $3.0796 on Feb. 22. Retail Gasoline Regular gasoline at the pump, averaged nationwide, fell 0.3 cent to $3.777 a gallon on Feb. 23, according to Heathrow, Florida-based AAA, the largest U.S. motoring group. It was the second daily decline after a run of consecutive increases back to Jan. 16 during which prices advanced 15 %. Net-long bets on four natural gas contracts rose 2.1 % to 139,275 futures equivalents in the week ended Feb. 19, CFTC data show. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps and ICE Henry Hub Swaps. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel. Natural gas advanced 4.2 cents, or 1.3 %, to $3.272 per million British thermal units on the Nymex in the week covered by the report. Futures gained 1.4 % to settle at $3.291 on Feb. 22. (Bloomberg/msw)
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