Hedge Funds Pile Back In on Short Positions; Oil Rig Count Down 16

Energy

Published: October 31, 2015 8:40 am

Last Updated: January 13, 2020 5:43 pm

In the week ended October 30, the number of rigs drilling for oil in the United States totaled 578, compared with 594 in the prior week and 1,582 a year ago. Including 197 other rigs drilling for natural gas, there are a total of 775 working rigs in the country, down from 787 week over week and down from 1,154 year over year. The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count.

Benchmark West Texas Intermediate (WTI) crude oil for December delivery rose by about $1.50 a barrel over the past five days to close the week up about 4.5% at $46.39, after rising above $47 briefly. Brent crude closed at $49.50 on Friday.

Both Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) reported third-quarter results Friday before the markets opened. Both companies reported better-than-expected profits and revenues, but both also plan to cut capital spending, and Chevron said it would fire 6,000 to 7,000 people and aims to sell assets worth $5 billion to $10 billion by the end of 2017.

Neither company touched its dividend, but one large independent producer did. Marathon Oil Corp. (NYSE: MRO) slashed its quarterly dividend from $0.21 to $0.05. The “lower-for-longer” price environment is very likely to put more pressure on independent producers, and Marathon was just the first of what could be several to take this step.

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Marathon’s market cap is around $12.5 billion, which puts it at the low end of the independent producers with a market value in the double-digit billions. There are six more companies with market caps below $20 billion and five are reporting results next week: Apache, Devon, Noble Energy, Concho and Continental.
The number of rigs drilling for oil in the United States is down by 1,004 year over year, and down by 16 week over week. The natural gas rig count rose by four, from 193 to 197. The count for natural gas rigs is down by 149 year over year.

Gasoline stockpiles decreased by 1.5 million barrels again last week. U.S. refineries ran at 87.6% of capacity, a week-over-week increase of 271,000 barrels a day. Refiners have increased throughput for two consecutive weeks now, as fall maintenance and turnarounds draw to a close.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — added 27,694 short contracts last week and 7,073 long contracts. The movement reflects changes as of the October 27 settlement date. Managed money holds 273,436 long positions, compared with 134,264 short positions. Open interest increased by 62,471 contracts to 1,676,033 week over week. The jump in open interest is essentially equal to the drop that took place over the past two settlement periods. The number of hedge funds with large short positions rose from 53 to 58 last week and is now larger than the number of funds (55) with large long positions.

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Among the producers themselves, short positions outnumber longs, 374,157 to 178,194. The number of short positions last week rose by 4,488 contracts and longs rose by 8,325 positions. Positions among swaps dealers show 272,697 shorts versus 227,077 longs. Swaps dealers cut 8,851 contracts from their short positions last week and added 9,095 long contracts.

Among the states, Texas dropped seven rigs last week and Oklahoma lost six. Louisiana dropped two, and three other states — North Dakota, Ohio and West Virginia — dropped one each. Kansas and New Mexico added two rigs each, and Alaska and Pennsylvania added one each.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count remained unchanged at 229.The Eagle Ford Basin in south Texas lost two rigs to bring its count to 75, and the Williston Basin (Bakken) in North Dakota and Montana now has 63 working rigs, down by one compared with the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $43.04 per barrel for WTI and an October 31 price of $36.78 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $42.99. The price for WTI and Eagle Ford crude rose by $1.99 a barrel in the past week, and the North Dakota Light Sweet price rose by $1.06.

The pump price of gasoline decreased week over week. Saturday morning’s average price in the United States is $2.179 a gallon, down about 1.4% from $2.211 a week ago.

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