Oil-focused funds lose big on falling crude prices

WTI Crude Oil

Brent for August settlement gained as much as 70 cents, or 1.5 percent, to $46.24 a barrel on the London-based ICE Futures Europe exchange.

Brent for August settlement gained as much as 62 USA cents, or 1.4 per cent, to US$46.16 a barrel on the London-based ICE Futures Europe exchange.

Oil edged up for a third straight session on Monday, climbing off last week's seven-month lows but with gains capped by the relentless rise in US supply and bloated global inventories.

Economic momentum could spur demand, which has emerged as a lead indicator for oil prices, with US figures on gasoline inventory levels offering a clue on consumer sentiment.

The increase in US drilling activity and shale production has mostly offset efforts by OPEC and other producers to cut output in a move to prop up the market.

US oil production rose by 20,000 barrels a day last week to 9.35 million, the Energy Information Administration reported Wednesday.

Despite the cuts, which started in January, markets remain well supplied due to rising output elsewhere. Russian Federation fully complies with the terms of the agreement on oil production cap between OPEC and non-OPEC nations at the moment, the country's Deputy Energy Minister Kirill Molodtsov said Tuesday.

But with oil prices constantly increasing, the commodity could likely go up towards a significant recovery over the upcoming weeks and if history could be considered as a basis, it is also telling that oil will return to bull market sooner than expected.


"Traders are also looking ahead to the EIA Energy Conference in Washington, where USA shale oil producers are expected to give their view of current market conditions", ANZ bank said.

Analysts at Bank of America-Merrill Lynch said that while supply was a problem, demand had not grown quickly enough to mop up any excess output.

Crude oil may see further pain ahead after logging a five-week losing streak and tracking for its worst first-half percentage fall since the late 1990s, according to a Reuters estimate.

Australia and New Zealand Banking Group (ANZ) said in note that the exchange data showed that investors had severed their net long positions in WTI and Brent to the lowest point in 10 months last week.

The gains had additional support from bargain hunters who stepped in after crude futures. The contract rose 37 cents, or 0.9 percent, to $43.38 on Monday. Brent advanced 0.6 %to $45.83 on Monday.

"On a speculative basis it's arguably worth going long here and playing for a bounce", Kilduff said. Given the journey time to U.S. shores (hark, seven-ish weeks), the expectation was that we would start to see lower volumes reflected in the June data. In the last week, there was an increase of 11 operating rigs in the United States, pushing the total number to 758, the highest since April 2015.

"U.S. production could jump to 10, maybe 10.5 million barrels a day by the end of the year, and when you add Libya, Nigeria and North Sea production, that will negate the Saudi-led cuts", said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.

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