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Oil bears right as futures retreat to six-month low

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Oil speculators bet right on prices after a fire at a refinery supplied by the biggest US crude hub curbed demand and drove futures to a six-month low.

Hedge funds and other money managers trimmed their net-long position again in the week through July 29, extending the drop from this year’s peak in June to 22 percent, US Commodity Futures Trading Commission data show.

West Texas Intermediate crude fell 6.8 percent in July, the most in more than two years. CVR Energy Inc. shut the Coffeyville refinery in Kansas after a fire July 29, reducing purchases from Cushing, Oklahoma, the delivery point for New York futures. Refiners cut back operating rates as gasoline demand dropped and fuel stockpiles increased.

“Coffeyville strikes right at the heart of Cushing and it’s going to have an outsized impact on Cushing inventories,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, by phone August 1. “It’s pushing WTI prices lower and may continue to do so. The demand outlook is building pressure on prices.”

Oil futures fell $3.45, or 3.3 percent, to $100.97 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report.

Prices rose to as much as $98.21 Monday after settling August 1, at $97.88, the lowest close since February 6.

The 115,000 barrel-a-day Coffeyville refinery may be shut for four weeks, Chief Executive Officer Jack Lipinski said July 31, on an earnings call. IIR Energy, an energy information provider based in Sugar Land, Texas, said July 29, that some units at the plant would restart within 72 hours.

Inventories at Cushing are near a six-year low and started declining in January after the southern leg of TransCanada Corp.’s Keystone XL pipeline began moving oil from the hub to Gulf refineries.

Supplies dropped to 17.9 million barrels in the week ended July 25, the lowest level since 2008, a US Energy Information Administration report last week showed.

Article Credit: Businessdayonline

Updated 4 Years ago

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Tags:     US Commodity Futures Trading Commission     John Kilduff     Jack Lipinski