"Traders grow even more bearish on oil"

" Traders grow even more bearish on oil \r\n\r\nDespite expectations of a tightening oil market later this year, hedge fund managers and momentum traders continue to be bearish on crude and continue to dump bullish bets.\r\n\r\nPortfolio managers are now the most bearish on crude oil futures and options in more than a decade as economic concerns and the stalemate in U.S. debt ceiling negotiations are trumping fundamentals. Those fundamentals are now more supportive for price after the latest OPEC+ cut and forecasts that the oil market will see a widening deficit by the end of this year.\r\n\r\nYet, near-term concerns about the economy and the growing fears of recession \u2013 coupled with the debt ceiling saga \u2013 have dictated the positioning of the money managers in the latest reporting week to May 16. And the positioning is not reflective of expectations of a tighter market at all.\r\n\r\nAcross the most important petroleum futures and options contracts, hedge funds\u2019 positions indicated the most bearish sentiment toward petroleum since 2011, according to\u00a0Bloomberg\u2019s estimates.\r\n\r\nSelling in crude oil futures and options began in the middle of April, when the OPEC+-fueled rally in prices\u00a0 gave way \u00a0to renewed macroeconomic concerns.\r\n\r\nTraders expect a recession, while the U.S. banking sector turmoil, the looming deadline for an agreement on raising the debt ceiling, and signs of a patchy economic recovery in China have also weighed on market sentiment.\r\n\r\nMoreover, U.S. diesel demand and prices have weakened this year as freight and industrial activities\u00a0 have slowed \u00a0amid higher interest rates and falling consumer demand for goods.\r\n\r\nOil prices booked their\u00a0 first weekly gain \u00a0last week after four consecutive weeks of weekly losses, snapping the longest weekly losing streak since November 2021.\r\n\r\nBut money managers continued to sell crude contracts.\r\n\r\n\u201cICE Brent settled 1.9% higher over the last week, which has left it trading above US$75\/bbl. Despite this, speculators remain negative towards the market with the net speculative long in ICE Brent falling by 6,020 lots over the last reporting week to 106,722 lots as of last Tuesday,\u201d ING strategists Warren Patterson and Ewa Manthey\u00a0 said \u00a0on Monday.\r\n\r\n\u201cThis is the smallest position that speculators have held this year. Looking deeper into the data reveals that the move was driven by longs liquidating, while the gross short position is fairly sizeable at 94,880 lots.\u201d\r\n\r\nThe selling in crude oil extended to a fourth week in the week to May 16, with the combined net long position \u2013 the difference between bullish and bearish bets \u2013 in WTI and Brent cut by another 17,600 lots to around 267,000 lots, Ole Hansen, Head of Commodity Strategy at Saxo Bank,\u00a0 said , commenting on the commitment of traders reports.\r\n\r\nThe net long is now near the low seen after the mid-March banking crisis and just ahead of the surprise OPEC+ announcement of additional cuts.\r\n\r\nThe net short position in ICE gasoil was reduced, thanks to improved refinery margins, while the ULSD benchmark diesel futures for fuel delivered into New York Harbor returned to a net long after falling into a net short position in the previous weeks, Hansen said.\r\n\r\nThe bearish mood among money managers contrasts with expectations of investment banks and forecasters that the market will become increasingly tighter as the year progresses.\r\n\r\nOil prices will return to above $80 per barrel in the second half of this year and could continue\u00a0 rising toward $90 \u00a0due to a deepening supply deficit, according to Bank of America.\r\n\r\nAnalysts in the latest monthly Reuters survey also see prices\u00a0 rising toward $90 \u00a0per barrel by the end of this year, driven by Chinese demand and a tightening market following OPEC+'s latest production cuts.\r\n \r\n \r\n The International Energy Agency (IEA) last week said that the decline in oil prices over the past few weeks contrasts with an expected\u00a0 tightening of the market \u00a0later this year when demand is set to exceed supply by nearly 2 million barrels per day (bpd). \r\n Despite these forecasts, hedge fund managers are focused on the near-term drivers of oil, all of which are bearish\u2014recession, debt ceiling, and patchy recovery in China. \r\n Ed Moya, senior market analyst at OANDA,\u00a0 said \u00a0on Friday, \u201cThe Chinese economic recovery is struggling and that has been kryptonite for any oil rallies.\u201d \r\n\r\n \r\n "

"Traders grow even more bearish on oil"

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