• 4 minutes England Running Out of Water?
  • 7 minutes Trump to Make Allies Pay More to Host US Bases
  • 10 minutes U.S. Shale Output may Start Dropping Next Year
  • 14 minutes Washington Eyes Crackdown On OPEC
  • 17 hours One Last Warning For The U.S. Shale Patch
  • 4 hours Oil Slips Further From 2019 Highs On Trade Worries
  • 3 hours Once Upon A Time... North Korea Abruptly Withdraws Staff From Liaison Office
  • 13 hours Modular Nuclear Reactors
  • 22 hours Chile Tests Floating Solar Farm
  • 4 hours Poll: Will Renewables Save the World?
  • 2 days China's E-Buses Killing Diesel Demand
  • 2 days Trump sells out his base to please Wallstreet and Oil industry
  • 1 day China's Expansion: Italy Leads Europe Into China’s Embrace
  • 2 days Trump Tariffs On China Working
  • 2 days Russian Effect: U.S. May Soon Pause Preparations For Delivering F-35s To Turkey
  • 2 days Biomass, Ethanol No Longer Green
  • 1 day US-backed coup in Venezuela not so smooth
  • 1 day New Rebate For EVs in Canada
Alt Text

India Stops Taking In Venezuelan Oil

A senior U.S. government official…

Alt Text

Oil Falls After EIA Reports Large Crude Build

Oil prices continued to fall…

Alt Text

The Next Major Flashpoint For U.S. Shale

Colorado’s overhaul of oil &…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Trending Discussions

Hedge Funds Continue To Reduce Bullish Bets On Oil

Over the past two weeks, hedge funds and other money managers have been trimming their combined net long position in the most-actively traded oil contracts, taking profits after oil prices hit four-year highs at the start of October.

The unhinged bullishness at the end of September and early October was stoked by fears that Saudi Arabia and Russia won’t be able to fill in the gap that U.S. sanctions on Iranian oil have been opening up.

Yet, after Brent Crude hit $86 a barrel earlier this month, market participants shifted their focus toward the demand side of the equation as various international organizations warned that global economic growth may be cooling and oil demand growth may be hit by high oil prices.

Accordingly, the perceived ‘looming supply shortage’ has been slowly giving way to concerns that Brent above $85 would be the beginning of demand destruction, especially in emerging markets that have become more vulnerable to oil price rallies because of the depreciation of their currencies against the U.S. dollar.

In the week to October 9, portfolio managers cut their combined net long position—the difference between bullish and bearish bets—in the six most important petroleum contracts by 36 million barrels, following a reduction by 19 million barrels in the week to October 2, according to data from exchanges compiled by Reuters market analyst John Kemp.

In the week to October 2, money managers cut their net long position in Brent Crude for the first time in six weeks—by 14 million barrels, following a combined increase of 172 million barrels since August 21, Kemp noted.

Hedge funds had already positioned to take profits after the September rally even before Saudi Arabia and Russia announced that they had been boosting production, and before the global markets sell-off last week that spread to commodities. Related: South Korea Cuts Iran Oil Imports To Zero

In the week to October 9, hedge funds’ liquidation was concentrated in Brent Crude and WTI Crude. The net long position in Brent Crude dropped by 6 million barrels while the net long position in WTI Crude plunged by 37 million barrels. In the five weeks to October 9, money managers slashed their net long position in WTI by a total of 90 million barrels, with the net long position now at the lowest level in a year, according to exchange data compiled by Kemp. As of October 9, the shorts in WTI had jumped to their highest level since the middle of June.

Brent Crude prices have been reflecting the market’s reaction to estimates about the loss of Iranian barrels on the one hand, and fears that oil demand growth may start to slow, on the other hand.

In WTI, wagers on falling prices have increased as U.S. inventories piled up, and concerns about constrained Permian takeaway capacity and the build-up of stocks have prevailed over the past few weeks.

After the late summer-early fall oil price rally—fueled by fears that as much as 2 million bpd of Iranian oil would be removed from the market—speculators moved to take profits. Related: What Will OPEC Do To Calm Stormy Oil Markets?

In addition, ‘cooler heads’ started to prevail among other investors who started to pay attention to warnings that higher oil prices posed a threat to global economic growth and consequently, the pace of oil demand growth, which has been strong so far this year.

The oil market, however, is currently prone to paying more attention to geopolitics than to fundamentals. In the next three weeks leading up to the sanctions on Iran, participants will focus on estimates of Iranian production losses, on how much of those losses Saudi Arabia and Russia can (and want to) offset, and how the fresh U.S.-Saudi spat over the disappearance of a Saudi journalist will unfold.

Hedge fund managers face an eventful month ahead.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News