(Bloomberg) -- Money managers are slashing wagers against Europe’s diesel benchmark.
Speculators cut short positions in ICE gasoil for a fourth consecutive week last week, the longest such run since February. The move comes as cold weather in Europe helps boost natural gas prices, offering support to the region’s diesel market.
As well as potentially boosting oil refiners’ processing costs, more expensive gas can encourage some consumers to switch to diesel consumption, a process known as gas-to-oil switching.
Cold weather is also a natural boost for both markets. Heating oil — part of the diesel market — is still used in parts of Europe and lower temperatures help consumption, even if buying can also be linked to how high or low prices are.
The continent is set for its coldest winter since the start of the Ukraine war. Next week, the mercury is set to slip below seasonal norms in northwest Europe.
See also: Europe Faces Its Next Energy Crisis Before Winter Really Starts
Prior to the recent string of declines, traders had amassed mammoth wagers against diesel, posting a record net-short position in September. That came amid a persistently bearish outlook for the global economy, particularly in China where a property crisis continues.
Still, it’s worth bearing in mind that northwest Europe’s stockpiles of diesel are expected to rise in coming months, according to a recent forecast from consultancy Wood Mackenzie Ltd. The fuel’s premium to crude oil, an important industry metric, also remains below the five-year seasonal average.
--With assistance from Eamon Akil Farhat.
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