Oil Trading Unwinds; Net-Long Position Increases

WEST, Tex. – Oil trading unwinds, and according to Hedge-fund managers, it will be the fastest change for the past 16 months as optimism increases on trade war truce as well as the rebound on futures from the slowdown in drilling shale.

Oil traders’ bearish sentiment on the West Texas Intermediate crude was slashed by around 41% on November 12, based on data that was released on Friday. As traders start coming into the market, turning into buyers, they have impacted about 10% on the rebound of oil since early in October.

According to a commodity strategist at TD Securities, Danial Ghali, they have seen a significant number on short coverings the past week. He said that the positive result was powered by the latest optimism in the market, mainly the increased hopes regarding the trade file. He also added that the recent news stating that the shale patch wouldn’t be able to keep up on its current output profile also drove the positive results they have experienced for the week.

Despite the US explorers remain pumping oil at a record; currently, the drilling has already dipped to its lowest point after over two years. It was mainly caused by the increasing pressure on companies to limit their spending while others have been short of cash. All these factors signify that a slowdown in output will eventually come.

On the other hand, the WTI net-long position or the deviation between bearish and bullish bets has increased by up to 32%, reaching to 152,174 futures. The number was based on the data from the US Commodity Futures Trading Commission. Long-only best declined by 3.3%, and the more bullish sentiments were mainly caused by the slump in short-selling or trading.

The data signals that the price rebound might only last for a short period, especially because the concerns regarding the global economy continues to grow as well as the impending supply inflow from places like Guyana and Brazil.

Andy Hall, a famed oil trader, also joined the sentiments of the International Energy Agency as they predict that the demand is likely to reach a plateau after about ten years and about a 1% growth rate for the next five years.

A meeting of OPEC along with its allies is set for next month, which will be a key development in the market. A boost in current stock prices is likely possible if they decided to continue with the production cut, but if not, prediction surrounds on resurfacing worries about the global market flooded with oil.