Tags: Hedge | Funds | Bullish | Oil

Hedge Funds Reduce Bullish Oil Bets to Record Low

Wednesday, 08 October 2014 07:27 PM

Money managers including hedge funds are fleeing from buying Brent crude futures, with bets on rising prices shrinking to the lowest share of the market on record.

Hedge funds and other investors have cut net-long positions in Brent futures as a share of outstanding contracts to the lowest level since ICE Futures Europe data was first published in early 2011. Their net positions represent 2.5 percent of the outstanding contracts, or open interest, compared with more than 15 percent in September last year.

The world’s most-traded oil contract has sunk to a 27-month low on speculation Saudi Arabia will refrain from output cuts needed to curb a crude glut. Slowing growth in Chinese demand and revived Libyan output add to the surplus. Brent futures are down about 20 percent since the summer even as violence erupted in Iraq and Syria with the rise of Islamic State militants.

“This gives us a clear picture of the sell-off,” Michael Poulsen, a Middelfart, Denmark-based analyst at Global Risk Management Ltd., said by e-mail. “The global oil overflow has had an amplifying effect on the exit by funds, hammering oil prices despite geopolitical unrest.”

Funds are now focused on stop-loss levels somewhere around $90 a barrel, a point that could trigger further declines, he said. Brent slid to $92.31 a barrel on Oct. 3. Stop losses are orders given to sell contracts at a pre-determined level.

Money managers have also been cutting positions because stricter regulation on commodities is making trading more difficult, Poulsen said. New rules including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Volcker Rule restrict banks from trading for their own account and expand oversight of commodities derivatives.

© Copyright 2020 Bloomberg News. All rights reserved.


   
1Like our page
2Share
InvestingAnalysis
Money managers including hedge funds are fleeing from buying Brent crude futures, with bets on rising prices shrinking to the lowest share of the market on record.
Hedge, Funds, Bullish, Oil
283
2014-27-08
Wednesday, 08 October 2014 07:27 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved