Hedge funds and other money managers were net buyers of 23 million barrels of futures and options linked to crude and refined products in the week to April, according to exchange and regulatory position records.

Fund managers have raised their overall bullish position in the six most important petroleum-linked futures and options contracts to a total of 745 million barrels, an increase of 444 million barrels in the last 12 weeks.

But the overall bullish trend masks sharply differing fortunes for crude and US gasoline on the one hand and middle distillates such as US diesel and European gasoil on the other (https://tmsnrt.rs/2D5jvl0).

Portfolio managers purchased 27 million barrels of Brent and 8 million barrels of WTI-linked derivatives in the week to April 2, while there was essentially no change in their position on US gasoline.

Fund positions now total 600 million barrels in Brent and WTI and 98 million barrels in US gasoline, with long positions outnumbering short ones by 6.5:1 in crude and almost 15:1 in gasoline.

By contrast, hedge funds were net sellers of 4 million barrels of US diesel and 8 million barrels of European gasoil, cutting the long-short ratio in those two contracts to just 0.86 and 4.79 respectively.

Hedge funds now hold an overall net short position in US diesel of almost 5 million barrels, their most oversold position since July 2017.

While funds are still net long in gasoil, by almost 53 million barrels, their net position has been trimmed by more than 20 million barrels over the last three weeks.

Differing fortunes for crude and distillates reflect differing forecast trajectories for oil production and consumption in 2019/2020.

Production cuts by Saudi Arabia and its allies, coupled with US sanctions on Iran and Venezuela, and the threat to exports from renewed fighting in Libya are tightening the crude market.

Brent futures have swung into a backwardation of more than $2 per barrel for the second half of 2019, from a small contango at the start of the year, as traders anticipate a drawdown in stocks.

But the slowdown in global trade growth and uncertain economic outlook are weighing on distillates, despite the planned introduction of new shipping rules that should boost demand from the start of next year.