Despite expectations of a tightening oil market later this year, hedge fund managers and momentum traders continue to be bearish on crude and continue to dump bullish bets.
last week after four consecutive weeks of weekly losses, snapping the longest weekly losing streak since November 2021.“ICE Brent settled 1.9% higher over the last week, which has left it trading above US$75/bbl.
The selling in crude oil extended to a fourth week in the week to May 16, with the combined net long position – the difference between bullish and bearish bets – in WTI and Brent cut by another 17,600 lots to around 267,000 lots, Ole Hansen, Head of Commodity Strategy at Saxo Bank, The net long is now near the low seen after the mid-March banking crisis and just ahead of the surprise OPEC+ announcement of additional cuts.
The net short position in ICE gasoil was reduced, thanks to improved refinery margins, while the ULSD benchmark diesel futures for fuel delivered into New York Harbor returned to a net long after falling into a net short position in the previous weeks, Hansen said. The bearish mood among money managers contrasts with expectations of investment banks and forecasters that the market will become increasingly tighter as the year progresses. due to a deepening supply deficit, according to Bank of America. per barrel by the end of this year, driven by Chinese demand and a tightening market following OPEC+'s latest production cuts.
Despite these forecasts, hedge fund managers are focused on the near-term drivers of oil, all of which are bearish—recession, debt ceiling, and patchy recovery in China. on Friday, “The Chinese economic recovery is struggling and that has been kryptonite for any oil rallies.”
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