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Credit crunch fears fuel hedge fund oil sell-off

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The prospect of a recession driven by tighter credit conditions following recent turmoil in the global banking sector, prompted hedge funds and other money managers to sell oil-related futures and options contracts at the fastest rate for almost six years, according to a report by Reuters.

The report cites records published by ICE Futures Europe and the US Commodity Futures Trading Commission as revealing that traders sold the equivalent of 142 million barrels in the six most important contracts in the seven days ending on 21 March, after selling 139 million barrels in the week to 14 March, with total sales over the two weeks representing the fastest for any fortnight since May 2017.

Investors liquidated 163 million barrels of bullish long positions in the two most recent weeks, while establishing 115 million barrels of new bearish short ones. In absolute terms, that represents one of the largest changes in position to have occurred in either direction in the last decade indicating a fundamental change in outlook, according to Reuters. 
 

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