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Oil optimism slumps to 12-week low as price falls into bear market
HEDGE funds kept running away from oil as prices tumbled into a bear market.
They cut bets on West Texas Intermediate (WTI) crude's rally to the lowest level in 12 weeks, according to data released on Friday. Optimism on Brent crude, the global benchmark, declined by the most this year.
WTI reached bear territory on Wednesday, dropping more than 20 per cent from its April high amid escalating disputes between the US and its trading partners. Prices rebounded towards the end of the week as Saudi Arabia and Russia reiterated their commitment to supply cuts, leaving it unclear whether investors had made the right call.
"The zeitgeist of the oil market is that it wants to track the broader macro environment," said Tamar Essner, Nasdaq's director of energy & utilities. "A lot hinges on what the outlook for the global economy looks like, which really hinges on a trade deal."
The net-long WTI position - the difference between bets on a price increase and wagers on a decline - fell 8.5 per cent to 183,372 futures and options contracts in the week ended June 4, the US Commodity Futures Trading Commission said. Long positions fell 6.1 per cent, while short-selling wagers ticked up 3.2 per cent.
"People were trimming but they weren't running for the exits," said Rob Haworth, who helps oversee US$159 billion at US Bank Wealth Management in Seattle. With more optimistic news for oil bulls near the end of the week, investors still had "room to get more constructive on prices", he said. BLOOMBERG