Hedge funds have remained bearish on oil prices, with traders concluding that Saudi Arabia and its OPEC+ partners can’t or won’t do more to reduce output in the short term, according to a report by Reuters. The report noted that hedge funds and other money managers sold the equivalent of 58 million barrels in the six most important petroleum futures and options contracts over the seven days ending on Dec. 5.
According to the report, the combined position had been cut to just 295 million barrels (7th percentile for all weeks since 2013) on Dec. 5 down from 680 million (65th percentile) on Sept. 19, while funds had reduced their net position in NYMEX and ICE WTI to less than 48 million barrels, among the lowest levels in the last decade.
The report also noted that the bearish trade has become crowded which could presage a rapid short-covering rally if and when sentiment turns. This has previously happened in June 2023.
