Hedge funds have been offloading US energy stocks at the fastest rate seen in five years marking the sector as the most heavily sold on Goldman Sachs’ prime brokerage trading desk last week, according to a report by Reuters.
The report cites a note sent to clients on Friday as highlighting that the rapid increase in short positions came as the S&P Energy Index (SPNY) dropped nearly 5% in the week leading up to 26 September. Although the sector rebounded with a 1% rally on Friday, driven by hopes of more Federal Reserve rate cuts following a soft inflation report, hedge funds had already ramped up their bearish bets.
Goldman Sachs noted that hedge funds targeted a variety of US energy companies, including oil and gas firms, consumable fuel providers, and equipment suppliers. The proportion of short bets outpaced long positions by a ratio of nearly six to one, signalling significant bearish sentiment in the sector.
The surge in short selling last week continued a broader trend of sustained divestment, with hedge funds having been selling off energy stocks for five consecutive weeks.
The selloff comes amid a gloomy outlook for oil prices. A recent Reuters poll of 41 analysts and economists projected that Brent crude would average $81.52 per barrel in 2024—its lowest forecast since February and down from August's estimate of $82.86.
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