Hedge fund positioning

After amassing a near-record bet on the recovery in oil prices between January and May, funds have either started taking profits or placed more bets the other way.

In early May, hedge funds held the equivalent of almost 420m barrels of Brent through futures and options contracts. Net longs — the difference between bets on higher and lower prices — have since fallen to less than 300m barrels equivalent.

In the US benchmark West Texas Intermediate there has been a similar pattern, with net longs declining by 100m barrels since late April.

“This has been largely driven by a fairly rapid take-up of short positions by the money managers group, which looks reflective of a broader change in sentiment,” say analysts at JBC Energy in Vienna.

“Inputs on the speculative side are certainly more bearish than bullish and crude fundamentals could certainly be used to make a case that there is some more downside to prices yet to be flushed out.”