(Bloomberg) -- Hedge funds kept running away from oil as prices tumbled into a bear market.
They cut bets on West Texas Intermediate crude's rally to the lowest level in 12 weeks, according to data released Friday. Optimism on Brent crude, the global benchmark, declined by the most this year.
WTI reached bear territory last Wednesday, dropping more than 20% from its April high amid escalating disputes between the U.S. and its trading partners. Prices rebounded toward the end of the week as Saudi Arabia and Russia reiterated their commitment to supply cuts, leaving it unclear whether investors had made the right call.
“The zeitgeist of the oil market is that it wants to track the broader macro environment,” said Tamar Essner, Nasdaq's director of energy & utilities. “A lot hinges on what the outlook for the global economy looks like, which really hinges on a trade deal.”
The net-long WTI position -- the difference between bets on a price increase and wagers on a decline -- fell 8.5% to 183,372 futures and options contracts in the week ended June 4, the U.S. Commodity Futures Trading Commission said. Long positions fell 6.1%, while short-selling wagers ticked up 3.2%.
“People were trimming but they weren't running for the exits,” said Rob Haworth, who helps oversee $159 billion at U.S. Bank Wealth Management in Seattle. With more optimistic news for oil bulls near the end of the week, investors still had “room to get more constructive on prices,” he said.
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To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Catherine Traywick
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