Hedge funds essentially stopped the sell-off in oil futures contracts last week as the rising tension between the United States and Iran overtook fears of a global economic slowdown.
According to exchange data compiled by Reuters columnist John Kemp, hedge funds and other money managers were net sellers of a total of 3 million barrels in the six most important petroleum futures contracts in the week ending June 18. Although portfolio managers sold petroleum futures for yet another week, last week’s net sale was the smallest in the past eight weeks.
In the previous week, to June 11, money managers continued to amass shorts and cut longs in oil, spooked by gloomy outlooks for the global economy and oil demand growth.
Hedge funds and other portfolio managers cut their net long position—the difference between bullish and bearish bets—in the six most important petroleum futures contracts by 96 million barrels in the week to June 11, according to exchange data compiled by Reuters columnist John Kemp.
Hedge funds cut longs by 54 million barrels, while they added 42 million barrels of shorts in the petroleum contracts in the week to June 11, accelerating the sell-off in the past seven weeks to 396 million barrels. In the 15 weeks before that, money managers had boosted long positions by 609 million barrels, the data compiled by Kemp shows.
On the week to June 18, however, the tension in the Middle East rose and money managers rushed to cover short positions.
WTI Crude prices jumped by 10 percent last week, after Iran shot down a U.S. drone over the vital oil shipping lane, the Strait of Hormuz, and U.S. President Donald Trump said that he called off a planned strike on Iranian targets.
Iran claims the drone was shot down because it was violating Iranian air space. Iran said invading its borders is the red line and it is ready for war, although it doesn’t intend to go to war with any country.
By Tsvetana Paraskova for Oilprice.com
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