Investors dump oil after U.S. refinery shutdown

Portfolio investors abandoned hope for an early rally in crude prices after a site-wide electricity failure caused an unexpected shutdown in production at BP’s, opens new tab refinery at Whiting in Indiana on Feb. 1.

The refinery is the largest in the U.S. Midwest and processes more than 400,000 barrels per day, so the extended closure for safety checks and restart processes threatens to reduce crude consumption significantly.

Hedge funds and other money managers sold the equivalent of 86 million barrels in the six most important petroleum-related futures and options contracts over the seven days ending on Feb. 6.

There were heavy sales of NYMEX and ICE WTI (-62 million barrels) and Brent (-23 million) as fund managers anticipated a significant increase in the amount of crude available.

Funds sold WTI at the fastest rate since October 2023 and before that July 2021 as the prospect of a squeeze receded.

The combined position in WTI was cut to a three-week low of 55 million barrels (4th percentile for all weeks since 2013) down from 117 million barrels (16th percentile) the previous week.

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