Hedge Funds Continue to be Bearish on US Oil

Hedge funds are more bearish about the outlook for U.S. oil prices than at any time for almost five years, according to data from the U.S. Commodity Futures Trading Commission.

Hedge funds and other money managers had a net long position in WTI-linked futures and options equivalent to just 118 million barrels of oil on July 21, down from a recent high of 294 million barrels 11 weeks earlier (link.reuters.com/pug35w).

The net position was the smallest since September 2010. Money managers interested in oil have a long bias (there has been no net short since the current time series began in 2006). So the small net long indicates an unusually high level of bearishness among hedge funds.

Sentiment has turned bearish as a series of negative factors hit the market in quick succession, including the nuclear agreement with Iran, China’s stock market tumble, rising output from OPEC, an uptick in the number of rigs drilling for oil in the United States, and flush oil stockpiles.

Hedge funds have cut their long positions since May by just over 100 million barrels from 388 million to 281 million. On the short side of the market, money managers have added almost 70 million barrels to take their total to almost 163 million barrels.

via Reuters

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