RE: Hedge funds bet on oil's 'big comeback' after pandemic hobbles producers7 Feb 2021 23:41
Bull Market'
Global crude and condensate production was down 8% in December from February 2020, prior to the pandemic's spread accelerating, according to Rystad Energy.
North America's output was down 9.5% and Europe's production declined just 1% over the same time period.
U.S. sanctions against Venezuela and declining oilfields in Mexico have kept oil output from Latin America sluggish.
Some banks are forecasting the United States, which leads with the number of COVID-19 cases, to reach herd immunity by July, which would greatly stimulate oil demand, said Jean-Louis Le Mee, head of London-based hedge fund Westbeck Capital Management, which is long a mix of oil futures and equities.
"Oil companies, for the first time in a long time, are likely to make a big comeback," he said. "We have all the ingredients for an extraordinary bull market in oil for the next few years." In the United States, hedge funds increased their allocation to Exxon Mobil Corp by 21,314 shares in the third quarter, the most recent U.S. filings compiled by Symmetric.io showed.
Hedge funds added another 9,070 shares of U.S. majors ConocoPhillips and 4,144 to Chevron Corp over the same time period.
Elsewhere, shorting activity in BP PLC fell by 16 million shares on Feb. 4 but increased slightly in European oil major Royal Dutch Shell Plc by 1.9 million shares, data from FIS’ Astec Analytics showed.
Some investors remain skeptical on Canadian oil companies, among the world's most carbon-intensive producers, though they are bouncing back faster from the pandemic than the United States.
Current short positions rose in 10 out of 14 Canadian oil companies in the Toronto energy index during the second two weeks of January, according to filings reviewed by Reuters.
U.S. shale production will not quickly rebound, given the capital required and debt producers are carrying, lending oil prices support, said Rafi Tahmazian, senior portfolio manager at Calgary-based Canoe Financial LP.
North America's oilfield services sector, which producers rely on to drill new wells, has been decimated, he said.
"They're decapitated from being able to grow," Tahmazian said. "The supply side is broken."
Thomson reuters
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