Hedge funds’ total positions in Brent and WTI crude oil have declined to the lowest level since 2016, Bloomberg reports. A growing trade conflict between the United States and China deterred money managers from opening new positions.
Investors tend to keep away from the volatile oil market, which is sparked by reports that the US has failed to persuade Beijing to cut Iranian oil imports. Meanwhile, volatility for WTI crude futures for September settlement increased to the highest level since 2017. At the end of July 2018, the total number of shipments fell to 949,000 from 968,000 a week earlier.
According to the US Commodity Futures Trading Commission (CFTC), hedge funds’ net-long position in West Texas Intermediate crude oil, which represents the difference between wagers on price gains and bets on a decline, fell by 1.4% to 386,764 futures and options. The number of long positions slid by 0.89% to 408,300, while short positions rose slightly.
At the same time, the Brent net-long position rose by 4,700 to 372,346 contracts, with short positions down 9,900 contracts and long positions down 5,200 contracts, ICE Futures Europe data showed.
According to some analysts, the trade conflict between the US and China is unlikely to be resolved in the near future. As a result, investors will continue to cut positions and reduce risks, reckoning that that the growth potential for oil prices will be limited for a long time.