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Mon 19 Nov 2018 – 5:50
New York
The HEDGE funds are betting that OPEC will have a hard time reversing the downward trend in oil prices.
Their combined wagers against crude West Texas Intermediate and Brent soared for the seventh straight week, the longest-running global derivatives short selling series back in 2011. Bearish wagers jumped 14% in the week finished November 13 and have tripled since the end of September. , according to data from the US Commodity Futures Trade Commission and ICE Futures Europe on Friday.
With falling oil prices on a bear market, the Organization of Petroleum Exporting Countries has pledged to do what it takes to reduce production.
However, it is unclear as to where the cartel and its allies will go, and it may require a reduction well over a million barrels a day that is discussed publicly to restore confidence, said Daniel Ghali, strategist premieres at TD Securities in Toronto.
"We have not only experienced a price shock, but also a momentum shock," he said. "Given this, we do not believe that oil will quickly recover these losses without a significant catalyst, which could well cause Opec to do more than expected."
The rise in bearish bets came during the 12-day WTI crude oil price defeat, the longest ever recorded, which culminated in a 7.1% fall on Tuesday.
Investors received more bearish news on Wednesday as a weekly report from the government showed that the boom in shale drilling pushed US inventories up 10.27 million barrels, nearly three times the median forecast.
Bill O. Grady, chief market strategist at Confluence Investment Management LLC in St. Louis, was surprised by the persistence of the downtrend, after the oil had already returned a large portion of its annual gain.
Computer-controlled jobs could put further downward pressure, he said, while crude collapsed from one technical hurdle to the other.
Nevertheless, he and Mr. Ghali have seen signs of optimism in a slight rise in long wagers on the WTI.
"This tells you that the new bulls are already quite present on the market," said O. Grady.
"Maybe we ended up finding traders who looked at it and said," OK, you're down 20%. Maybe I should start launching long positions there "" BLOOMBERG
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