Monday , September 23 2019

Oil short-sellers are making a wrong-way bet

Bloomberg

It’s getting tougher to bet on oil in the age of Trump trade tweets and Chinese retaliation, with hedge funds getting it wrong for a seventh time in nine weeks.
This time around, short-sellers made their biggest retreat in a year in week ended August 20, slashing by 25% their wagers that West Texas Intermediate crude would decline, data show. That made sense as US had just delayed sanctions against Huawei, offering a rare hint of progress in the trade spat that has dogged the market.
On Friday, optimism unraveled as China announced tariffs on US oil for the first time, sending futures plunging and wiping out all of the week’s gains. The whipsawing has plagued the market all year, but it seems to be getting more unpredictable. Before the last week of June, hedge funds got the direction of crude wrong just seven times in six months.
Short-sellers probably didn’t want to take their chances in case the Saudis came back with statements about adjusting supplies to bolster prices, he said.
Net-length in WTI — the difference between wagers on an increase and those on a decline — rose 3.2% to 206,842 options and futures, the U.S. Commodity Futures Trading Commission said. Long-only bets fell 3.9%.

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