oil: Oil short sellers make a come back as OPEC moves to centrestage

The oil bears are back, and they're looking at OPEC before making their next move.

While money managers slashed bets on rising West Texas Intermediate crude prices for a ninth week in their longest retreat on record, short-selling jumped to the highest in more than a year. The rapid shift in sentiment sets the stage for an OPEC meeting on Sunday.

"It's been a long time ago," said Brian Kessens, who helps manage $ 16 billion in energy assets at Tortoise in Leawood, Kansas. "What OPEC needs to be sure of the produce-as-much-as-you-can mode. OPEC's most important factor in the near term. "

Investors will be in the process of becoming more productive than ever before. A change in policy would follow President Donald Trump's calls to the cartel to lower prices and to make it clear to Iran from US-imposed sanctions.

Among the reasons for the bearishness of the oil market are OPEC production at the highest since 2016, a record of output and waivers given to a number of importers of Iranian crude, including China.

"The supply side did not need to play out, especially given the waivers, and at the same time," said Ryan Fitzmaurice, an energy strategist at Rabobank. "From the long side, it was a questionable time to go max long."

Hedge funds' net-long position – the difference between bets and wagers on a drop – in WTI crude slid 18 per cent to 160,291 futures and options in the week ended Nov. 6, according to the US Commodity Futures Trading Commission. That's the lowest since September 2017. Long fell 6.6 percent to the lowest since July 2015, while shorts soared 29 percent to the high since October 2017.

But the bottom line might be near for crude. WTI's 14-day relative strength index is below 30, a level marking oversold territory. And there are still bullish factors in the market, such as Iran supplying the crude oil, declining production in Libya and Nigeria, according to Harry Tchilinguirian, head of market strategy at BNP Paribas in London. More, he said.

"With this level of correction and the supportive factors that I am looking at, we could see a turnaround," said Tchilinguirian. Still, "if you were to ask traders right now, you would buy into this, the typical answer you'll get, I do not know if I want to catch a falling knife."

OTHER POSITIONS: The net-long position in Brent dropped 15 per cent to 260,048 contracts, ICE Futures Europe data show. Long fell 11 percent, while pink shorts 8 percent. Money managers cut their net-long positions on US gasoline by 8.2 per cent and cut net-long on diesel by 13 per cent, according to the CFTC.