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Hedge funds cut shorts on European diesel amid supply squeeze

ICE Futures Europe data shows European gasoil short-only positions fell to a more-than-two-year low, while longs hit the highest level since the week before the US-Iran war began.

Reported · Written up by our desk · Hedge Funds

Hedge funds have reduced bearish exposure to European diesel, signaling growing expectations that a severe supply squeeze will persist, according to a report by Bloomberg cited by Hedgeweek. The shift is tied to continuing disruptions across crude and refined-product flows.

ICE Futures Europe data cited in the report shows European gasoil short-only positions fell to their lowest level in more than two years last week, after funds cut 309 short-only contracts. At the same time, funds added 1,498 long-only positions, pushing gross longs to their highest level since the week before the US-Iran conflict began, leaving hedge funds net more bullish on European diesel than at any point in roughly six months.

The outlook is supported by refining margins rising toward record levels, reflecting tight supplies. Middle Eastern crude exports have been disrupted, restrictions on Russian diesel exports remain in place, and a fresh wave of Ukrainian attacks on Russian refineries has further reduced refined-product availability, the report says.

The report also notes a similar repositioning toward US diesel and gasoline, with CFTC data showing gross long positions in US-traded diesel contracts rising to the highest level since the opening week of the US-Iran conflict. Gasoline positioning has followed suit, with net-long bets reaching their most bullish level since March 17, around the time average US pump prices first moved above $4 a gallon during the conflict.

Latest closeWTI crude $82.40 ▲1.4%|Gasoline (RBOB) $2.901 ▼7.3%

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