Oil & Gas Leaders Magazine: Sustainability Through Innovation in UAE's Oil and Gas Industry

Hedge Funds Hold Near-Record
Short Positions in Petroleum
Oil prices have been rising gently during the
past four trading sessions despite concerns
about the continued rise in the U.S. rig count
and enormous excess inventories.
Front-month Brent futures prices are up by
about $2 a barrel since touching a low of $44
on June 21, which could herald a break in the
downtrend that had been in place since late
May.
Rising prices most likely reflect hedge funds
covering some short positions rather than a
fundamental reappraisal of the outlook for
supply, demand and inventories.
Hedge fund managers have become
progressively more bearish about petroleum
prices in recent weeks.
By June 20 hedge funds had amassed 480
million barrels of short positions in the five main
futures and options contracts linked to crude,
gasoline and heating oil, up from only 350
million barrels on June 6.
Fund managers have only held a larger number
of short positions in petroleum once before, in
January 2016, when their combined shorts in
the five contracts totalled 484 million barrels.
The position in January 2016 coincided with
the trough of the oil price cycle and marked the
start of the recovery.
The question is whether the large number of
shorts now will mark a similar turning point.