Hedge funds scaled back some of their short positions in crude oil futures and options after prices failed to fall further, suggesting the market was running out of negative momentum.
Along with other money managers they cut their combined short position in the three main Brent and WTI contracts by 36 million barrels in the week to Sept. 13. This partially reversed an increase the previous week of 57 million barrels, according to an analysis of position data published by regulators and exchanges which showed that money managers cut their short positions in WTI by the equivalent of 25 million barrels and in Brent by 11 million barrels. The fall in bearish short positions came as benchmark prices steadied after dropping sharply since the middle of August. Brent prices for November dropped just 16 cents between Sept. 6 and Sept. 13, after declining by $1.47 and $1.59 in the two previous weeks. With the benchmark already down by more than $4 per barrel from the recent high, and not falling any further in the short term, some bearish hedge funds decided to take profits.
By contrast, there were few changes on the long side, and certainly no sign of increased bullishness. Long positions fell by 8 million barrels in WTI and 3 million barrels in Brent.
The combined impact of these changes is that hedge funds and other money managers increased their net long position in crude futures and options by a modest 26 million barrels to 555 million barrels.
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Research Associate at Center for Islam and Global Affairs (CIGA) at Istanbul Sabahattin Zaim University
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