Oil CEOs' Grim Outlook Rubs Off on Speculators Fleeing Market

(Bloomberg) -- The world’s biggest oil companies are painting a grim picture of the future and speculators are listening.

Hedge funds reduced bullish bets to the lowest level in five years as oil capped the worst month since the financial crisis. The net-long position in West Texas Intermediate contracted 7 percent in the seven days ended July 28, U.S. Commodity Futures Trading Commission data show.

BP Plc said oil prices will be lower for longer and Royal Dutch Shell Plc said it’s preparing for a prolonged downturn. Exxon Mobil Corp. and Chevron Corp. reported their worst earnings in years. Supply will outpace demand by 1 million barrels a day through 2016, according to Bank of America. Prices need to stay below $40 a barrel for months for U.S. output to fall enough to erode the global surplus, IHS Inc. said.

“The speculators are looking at the bad earnings and the oil executives’ negative tone of commentary, and taking it as a bearish sign,” Phil Flynn, senior market analyst for Price Futures Group Inc. in Chicago, said by phone July 31. “Everybody is running out of this market in droves.”

WTI dropped $2.38, or 4.7 percent, to $47.98 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Futures slid 33 cents to $46.79 a barrel in electronic trading at 12:12 p.m. Singapore time Monday, after capping a 21 percent drop in July, the biggest monthly decline in almost seven years.

150,000 Jobs

Exxon, the biggest U.S. energy producer, reported July 31 its lowest profit since 2009 while No. 2 Chevron posted its worst results in 12 years. Chevron earlier last week said it would eliminate 1,500 jobs in an effort to cut $1 billion in spending.

BP, Shell, Schlumberger Ltd. and Halliburton Co. have announced thousands of job cuts in recent weeks as they prepare for a prolonged stretch of low prices. Since the crude rout began last summer, the industry has eliminated 150,000 jobs, according to Graves & Co., a Houston-based adviser that has closely tracked the cutbacks.


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