Hedge funds reacted pessimistically to the Brent crude view for the primary time of their history as concerns about an oversupply of oil pushed futures prices lower.
Asset managers’ short positions exceeded long bets by 12,680 lots within the week ended September 10, the primary time this has happened since January 2011 in ICE Futures Europe data. Hedge funds remained net bullish on WTI, although the position was the smallest since February. Asset managers reduced their net potential position for bullish Nymex WTI to 105,024 lots, weekly CFTC futures and options data show.
Investors are increasingly concerned about an oversupply of crude oil next 12 months as non-OPEC countries increase production and demand from China and the United States – the world’s largest oil consumers – halting.
The gloom also spilled over into refined products markets. Asset managers also took a more bearish approach to diesel than they’ve in nearly nine years, increasing their net short position to 38,609 lots. It was an analogous story for gasoline, where the online long position was the least optimistic in greater than seven years, shrinking to only 5,193 lots. Asset managers also increased their bearish gasoil bets to a record net short position of 64,461 lots.
Oil options trading and heavy selling by algorithm-driven traders helped push prices higher. lowest for greater than two years earlier this week. As bearish bets increased and trading became crowded, a few of these positions processed later this week, resulting in a modest price recovery.
