Hedge funds sell oil as global economy slows
From Reuters Source
Hedge funds cut their bullish positions in petroleum last week for the second week running as anxiety about the slowing global economy and oil consumption trumped optimism over production restraint by OPEC and its allies.
Hedge funds and other money managers reduced their net long position in the six major petroleum futures and options contracts by 35 million barrels in the week to Aug. 13, having cut it by 25 million barrels the previous week.
Portfolio managers last week sold Brent (37 million barrels), U.S. gasoline (15 million), U.S. heating oil (9 million) and European gasoil (4 million) as the consumption outlook deteriorated.
By contrast, funds bought NYMEX and ICE WTI (30 million barrels) as new pipelines from the Permian Basin to the coast reduced congestion near the oilfields and supported local prices.
Overall, fund managers have cut their net long position in the six major contracts to only 543 million barrels, down from a recent peak of 911 million in April and the lowest total since June and before that February.
If “structural” long and short positions (minimum levels of long and short positions, which never change) are excluded from the analysis, fund managers are running a dynamic net long of only 52 million barrels.
The hedge fund community now holds a basically neutral position on petroleum prices, with the global economy replacing U.S. sanctions against Iran and Venezuela as the dominant theme this year.
Falling oil prices have prompted Saudi Arabia and its allies in the OPEC+ group to extend their production restraint until at least the end of the first quarter of 2020.