Hedge funds turned bearish towards oil prices at the fastest rate on record in the first week of November amid growing doubts about whether OPEC will reach a successful deal to curb its growing production.
(John Kemp is a Reuters' market analyst. The views expressed are his own.)
LONDON, Nov 15 (Reuters) - Hedge funds turned bearish towards oil prices at the fastest rate on record in the first week of November amid growing doubts about whether OPEC will reach a successful deal to curb its growing production.
Hedge funds and other money managers cut their net long position in Brent and West Texas Intermediate (WTI) futures and options by 149 million barrels in the week ending Nov. 8 (http://tmsnrt.rs/2fUSep0).
The weekly reduction in net long positions was the largest on record, according to an analysis of data published by regulators and exchanges (http://tmsnrt.rs/2fUUexF).
The sell-off in crude prices, which has been under way for three weeks, was initially led by the liquidation of stale long positions, but the most recent week saw the emergence of a heavy wave of fresh short-selling.
Hedge funds increased their short positions across the three main crude contracts by 135 million barrels in the seven days to Nov. 8, while long positions were cut by 13 million barrels.
Hedge funds' short positions in the flagship NYMEX WTI contract increased by 83 million barrels (http://tmsnrt.rs/2gcEVTt).
This is the fifth time since the start of 2015 that hedge funds have accumulated a very large short position in NYMEX WTI.
Each time the hedge funds have amassed a large short position oil prices have fallen, only to rise again when the shorts are closed out.
The cycles of short-selling and the rise and fall in oil prices have been closely synchronised and had a strongly predictable component.
But the cycles have become faster and deeper as more momentum-driven hedge funds trade the cyclical behaviour. The entire short-selling cycle is accelerating.
The current cycle has been the most aggressive so far with short positions established at the fastest rate on record (http://tmsnrt.rs/2gcMtpn).
Hedge funds accumulated an extra 89 million barrels of short positions in NYMEX WTI in just a fortnight.
The total short position in NYMEX WTI on Nov. 8 at 145 million barrels was still well below the maximum short position recorded on Aug. 9 of 220 million barrels.
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