Hedge funds have become increasingly bullish about the outlook for gasoline prices even as they have become more cautious the prospects for heating oil this winter.
Hedge funds and other money managers have raised their net long position in US gasoline blendstock futures and options by almost 27mn barrels since the end of July. Hedge funds have a net long position of almost 22mn barrels, up from a net short position of 5mn barrels eight weeks ago, according to an analysis of position records published on Friday.
But in heating oil hedge funds have cut their position from a net long of 22mn barrels four weeks ago to a net short of 2mn barrels in the week ending September 20.
Hedge funds are net short of heating oil futures and options for the first time since April, according to position data published by the US Commodity Futures Trading
Commission.
Concern about the high level of US gasoline stockpiles has abated as stocks have fallen by almost 17mn barrels since late July.
Gasoline stocks are now just 6mn barrels or 3% higher than at the same point in 2015, down from a year-on-year surplus of 26mn barrels or 12% in July.
Gasoline consumption is running at a very high rate after the end of the summer driving season, according to weekly estimates from the US Energy Information Administration.
US refineries have continued processing an unusually high volume of crude in late August and through September to meet strong
demand.
But the consequence of heavy refining runs is that distillate stockpiles have started to rise after falling through most of the second and third quarters.
Distillate stocks are up 13mn barrels or 9% from the same time last year and up from a surplus of just 3mn barrels or 2% four
weeks ago.
Earlier in the summer, most analysts were talking about a gasoline glut, which would force refiners to cut refinery throughput, and support distillate markets in the autumn and winter.
But with gasoline stocks under control and refineries still processing at high rates to meet demand from motorists, the focus has shifted to the potential over-production of distillates.
The latest seasonal forecasts show temperatures at or above average through winter 2016/17 across almost all of the United States.
The futures markets responded by pricing in a much higher level of distillate stocks over the next six months.
Timespreads for heating oil futures between October 2016 and March 2017 weakened through late August and early September.
While the timespreads have tightened again in the second half of September, heating oil crack spreads remain well off recent highs.