Crude oil bulls are quickly returning! Adding a position this time is a little different
The renewed war between the United States and Iran has caused crude oil bulls who had left the market to quickly return to the market. Last week, both Brent crude oil and New York crude oil futures rose sharply. The cumulative weekly gains of the main contracts were 17.34% and 14.35% respectively, and both returned to above US$80 per barrel. Behind the rapid rise in crude oil futures prices, the return of bull funds to increase positions is an important factor. It is worth noting that funds have returned to the market this time, which is different from March. They have significantly increased their long positions in diesel and heating oil, forming a "crude oil + refined oil" resonance long structure.
The renewed war between the United States and Iran has caused crude oil bulls who had left the market to quickly return to the market. Last week, both Brent crude oil and New York crude oil futures rose sharply. The cumulative weekly gains of the main contracts were 17.34% and 14.35% respectively, and both returned to above US$80 per barrel. Behind the rapid rise in crude oil futures prices, the return of bull funds to increase positions is an important factor. It is worth noting that funds have returned to the market this time, which is different from March. They have significantly increased their long positions in diesel and heating oil, forming a "crude oil + refined oil" resonance long structure. Positions reversed rapidly, bulls returned Perhaps due to the continued exit of early long positions and the 30% plunge in oil prices, funds still adopted a wait-and-see attitude immediately after the conflict between the United States and Iran escalated again on June 26. The most obvious manifestation is that the net long position in the crude oil market is still declining. According to data from the U.S. Commodity Futures Trading Commission (CFTC), the net long position of WTI crude oil decreased by 19,507 lots to 65,681 lots in the week ended July 7. This is the third consecutive week that bulls have reduced their holdings, and the reduction has expanded. However, as the US military announced on July 14 that it would resume its naval blockade against Iran and launch a new round of strikes against Iran. Iran's Islamic Revolutionary Guard Corps launched attacks on multiple targets of the US military, and the military operations significantly changed the idea of funding allocation. Bull funds are again entering the market in a big way. According to Intercontinental Exchange (ICE) European Futures weekly futures and options data, in the week ended July 14, long positions in Brent crude oil recorded the highest weekly increase since December 2016, pulling overall positions back from a seven-month low. According to the latest data from the U.S. Commodity Futures Trading Commission (CFTC), in the week ending July 14, speculators’ net long position in New York crude oil increased by 11,704 contracts to 86,383 contracts. In addition, the net long position in Brent and WTI crude oil increased to 252,836 contracts, a five-week high. Funds simultaneously increased their net long positions in heating oil on the New York Mercantile Exchange by 1,868 lots, with total positions rising to 36,451 lots, the highest level since the early days of the Iran war in March this year. The weekly increase in Nymex diesel's net long position was also the largest since before the war broke out in February. What is the difference in adding funds this time? The direct trigger for this round of capital increase is the resumption of military strikes against Iran by the United States. The market's geopolitical uncertainty will continue to inject a risk premium into oil prices. The US military implemented a naval blockade against Iran from April 13 to June 18. Unlike March, when the market placed more emphasis on long crude oil, this time funds have significantly increased their long positions in diesel and heating oil, forming a "crude oil + refined oil" resonant long structure. From a single-week level, the increase in net long positions in diesel hit a stage high, while the total net long position in fuel oil hit a new high since the conflict in March this year. With the sharp rise in international oil prices, the energy sector of the domestic capital market has also emerged from an independent market due to capital inflows. China Universal (159930), the largest energy ETF, has been favored by funds on 3 of the past 5 trading days, with a total net inflow of 185 million yuan. The fund’s underlying index constituent stocks: PetroChina rose by more than 11% in a single week, China Shenhua increased by 7% in a single week, and Offshore Oil Development and Shaanxi Coal Mining both increased by more than 6% in a single week. The impact of the second conflict between the United States and Iran on the global fuel market is also significant. Iran's attacks on ships transiting the Strait of Hormuz have significantly reduced traffic in the channel in the past 10 days, thereby tightening the global supply of refined oil products such as diesel and gasoline, pushing global refiner profit margins to historic highs. According to data from ship tracking agency Kpler, navigation volume in the Strait of Hormuz has fallen to a three-week low. Half of the ships currently passing through are Iranian ships, and most traffic passes through the Iranian side of the route. By the 16th, ship traffic in the Strait of Hormuz continued to weaken, and the number of ships confirmed to pass through the strait that day dropped to eight, the lowest level in the past three weeks. Seven of the eight ships passing through the Strait of Hormuz that day chose to pass through the Iranian side of the channel, reflecting that shipping companies have further concentrated on this channel after reassessing the regional security situation, crew safety and insurance risks. Crack spreads are hitting all-time highs
"Speculative funds are concentrated on long diesel and heating oil, which may form a wave of short squeezes in crack spread contracts." A professional in the futures industry told a Chinese reporter from a brokerage that the crack spread in the United States is reaching a record high, and funds are concentrated on trading the risk of supply interruption of refined oil. At present, the operating rate of U.S. refineries has remained at a high level of more than 95% for many consecutive weeks, but refined oil inventories are still at low levels in recent years, and gasoline inventories have dropped to the lowest level since 2012, further supporting the strengthening of crack spreads. In 1994, the New York Mercantile Exchange (NYMEX) launched the standardized 3:2:1 crack spread futures, bundling 3 WTI crude oil futures, 2 unleaded gasoline futures, and 1 heating oil futures, simulating a refinery production structure in which three barrels of crude oil produce two barrels of gasoline + one barrel of distillate. In other words, the total value of refined oil minus the cost of crude oil is the cracking spread. Previously, when crude oil fell by 30% in June and the price fell to US$60, refined oil prices did not weaken simultaneously. However, the market is overly focused on the crude oil decline data and determines that the oil market will be weak for a long time. At that time, the price difference between gasoline and crude oil in the crack price of U.S. crude oil was still quoted at US$43.21 at the periodic low on June 12, which was much higher than the US$17 at the beginning of the year, indicating that the refined oil market was still tight. Entering July, crude oil cracking spreads continued to hit record highs. On July 16, the crack price difference between U.S. gasoline and New York crude oil was quoted at US$59.74, which continued to rise from US$57.99 per barrel on June 29. The crack price difference between U.S. diesel and crude oil was quoted at US$66.90/barrel on July 6, and further rose to US$79.56/barrel on July 13, a sharp increase of US$12.53/barrel in a single week. (
"Speculative funds are concentrated on long diesel and heating oil, which may form a wave of short squeezes in crack spread contracts." A professional in the futures industry told a Chinese reporter from a brokerage that the crack spread in the United States is reaching a record high, and funds are concentrated on trading the risk of supply interruption of refined oil. At present, the operating rate of U.S. refineries has remained at a high level of more than 95% for many consecutive weeks, but refined oil inventories are still at low levels in recent years, and gasoline inventories have dropped to the lowest level since 2012, further supporting the strengthening of crack spreads. In 1994, the New York Mercantile Exchange (NYMEX) launched the standardized 3:2:1 crack spread futures, bundling 3 WTI crude oil futures, 2 unleaded gasoline futures, and 1 heating oil futures, simulating a refinery production structure in which three barrels of crude oil produce two barrels of gasoline + one barrel of distillate. In other words, the total value of refined oil minus the cost of crude oil is the cracking spread. Previously, when crude oil fell by 30% in June and the price fell to US$60, refined oil prices did not weaken simultaneously. However, the market is overly focused on the crude oil decline data and determines that the oil market will be weak for a long time. At that time, the price difference between gasoline and crude oil in the crack price of U.S. crude oil was still quoted at US$43.21 at the periodic low on June 12, which was much higher than the US$17 at the beginning of the year, indicating that the refined oil market was still tight. Entering July, crude oil cracking spreads continued to hit record highs. On July 16, the crack price difference between U.S. gasoline and New York crude oil was quoted at US$59.74, which continued to rise from US$57.99 per barrel on June 29. The crack price difference between U.S. diesel and crude oil was quoted at US$66.90/barrel on July 6, and further rose to US$79.56/barrel on July 13, a sharp increase of US$12.53/barrel in a single week. (