Monday, 20 July 2015

Hedge funds turn unusually bearish on oil: Kemp

In Oil & Companies News 21/07/2015

Hedge funds and other money managers have rarely been so bearish about the outlook for oil prices, according to the latest positioning data from the U.S. Commodity Futures Trading Commission.
Hedge funds boosted short positions in futures and options linked to the price of U.S. crude to 138 million barrels by July 14, from 84 million four weeks earlier. Over the same period, they cut long positions from 340 million to 292 million barrels.
The hedge fund community has an inherent long-bias, but the ratio of long to short positions, at just over 2:1, down from 4:1 a month ago, is among the lowest in the last six years (
The number of hedge funds with reported short positions was equal to the number of longs last week, which is highly unusual.
The liquidation of long positions and establishment of fresh shorts help explain the downward pressure on U.S. crude prices over the last month.
The market has not been this bearish about the outlook for oil prices since March, when investors were worried about rising inventories and the possibility storage space at oil refineries and tank farms would run out.
In March the number of short positions was much higher, at around 200 million barrels, but so was the number of long positions, at around 380 million barrels.
Prices subsequently rose more than $16 per barrel, about 36 percent, as the short positions were unwound over the next two months.
There is some potential for hedge funds to add to their current short positions and reduce their long exposure further, putting extra downward pressure on crude prices in the next few weeks.
But hedge funds are already running unusually short, and at least some of those positions need to be bought back, which could moderate selling pressure and push prices higher again. 
Source: Reuters (Editing by Dale Hudson)