Hedge funds and other institutional traders have reduced their bullish position on oil substantially ahead of the OPEC+ meeting on Thursday.
In the week to November 21, bullish bets were slashed – with net-long positions being cut by over 19,000 positions to the lowest since June, Bloomberg reported, citing data from ICE Futures Europe and the CFTC.
Long-only positions, meanwhile, also dropped by nearly 19,500 to the lowest since April.
OPEC+ is meeting on Thursday to discuss production policies. News of internal disagreements added volatility to oil prices last week, while the possibility for deeper cuts from Saudi Arabia lent upward potential to benchmarks.
Even with the potential of deeper cuts, oil began the week with a decline, extending a series of daily losses that began last week. Earlier today, however, the mood changed and both Brent crude and West Texas Intermediate began to trade with gains.
Analysts attributed these to the nearing OPEC+ meeting and the predictions of deeper cuts.
“Oil bears should be careful not to underestimate Saudi’s resolve,” Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank, told Bloomberg. “But it will be hard for them to secure buy-in from all member states.”
Last week, African members of the cartel were reported to have asked for higher production quotas despite Saudi Arabia’s attempts to keep a cap on production to keep prices higher. The latest reports suggest disagreements have been ironed out, after OPEC announced a postponement of the meeting, originally planned for last Sunday.
This should help the group agree on net steps that, according to Eurasia Group analysts, could include additional cuts of up to 1 million bpd on top of Saudi Arabia’s voluntary cuts of the same size.
In the absence of additional cuts, the Eurasia Group team said, Brent crude could drop to the low $70s, Bloomberg reported. This forecast suggests worries about economic growth have remained enduring despite factual data about oil demand so far this year.Share This