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According to UBS, the integrated energy companies, particularly TotalEnergies (EPA:TTEF) and Shell, emerged as the most crowded long positions.
TotalEnergies is leading the pack due to its defensive attributes, strong fourth-quarter results, and the advantage of higher European natural gas prices this year. Shell’s crowding score notably increased from 7.1 to 12.0, following a reassuring Capital Markets Day (CMD) last week, which appeared to boost investor confidence.
In contrast, refining subsectors faced the most significant short interest, with UBS citing weakening refining margins during March. Neste was highlighted as the most crowded short in the sector, driven by weaker near-term prospects due to challenges in renewable diesel margins across Europe and the US.
Meanwhile, green hydrogen companies like ITM Power, Nel, and De Nora also remained heavily shorted amid concerns over slower-than-expected orders and delayed market uptake.
Shell not only experienced a rise in its net long position but also saw the largest increase in investor interest month-over-month. This was attributed to the positive reception of its recent CMD. On the other hand, Equinor saw the largest month-on-month decline in net long position, falling from 6.1 to 1.0. Analysts believe this is primarily due to the potential for a ceasefire in the Russia/Ukraine conflict and reduced risk of a gas price surge as winter ends.
Hedge fund activity also reflected these trends, with Shell witnessing the most significant outflows despite its higher crowding score. This may have been influenced by increased trading activity around its CMD and some investors taking profits.
OMV followed with the second-highest outflows, likely due to profit-taking after a merger announcement deemed successful by UBS. In contrast, TotalEnergies and Equinor both saw inflows from hedge funds, indicating a divergence in investment strategies within the sector.
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