Hedge funds and other money managers increased their bearish exposure to crude oil last week, driving short positions in West Texas Intermediate (WTI) to the strongest point in almost five months. Commodity Futures Trading Commission (CFTC) data show managers added 10,866 gross short positions in WTI futures during the week ended June 16, bringing total gross short interest to 102,895 contracts.
The aggregate short position of 102,895 contracts is the largest recorded since late January, when supply concerns weighed on oil markets. The shift toward greater short exposure reflects market expectations that developments on the geopolitical front could allow more crude to reach global markets.
Market participants point to the prospect of a preliminary U.S.-Iran peace agreement as a central factor behind the move. Such an outcome is expected by traders to enable higher Iranian oil exports and to ease disruptions to vessel traffic through the Strait of Hormuz. In addition, Washington's decision to grant sanctions waivers on certain Iranian oil sales has bolstered the view that additional Middle Eastern barrels could enter the market.
Traders are increasingly wary that the return of Middle Eastern supply may outpace demand growth. That concern is amplified by continued weakness in crude imports by China, which remains the world's largest oil importer, according to the information market participants cited.
Bearish positioning was not limited to crude. Short-only bets in Nymex diesel advanced by 1,854 contracts during the same reporting week, lifting the short-only diesel tally to 22,214 contracts. That level is the highest for diesel shorts since early March, a period when regional conflict pressures were emerging.
The CFTC figures provide a snapshot of money manager sentiment through June 16 and highlight where traders have chosen to increase bearish exposure across both crude and refined products. The data indicate expectations of higher supply from Iran and improved vessel passage through a key shipping chokepoint as driving forces behind the recent positioning.
Key facts
- Managers added 10,866 gross short WTI futures positions in the week ended June 16.
- Total WTI gross short positions stood at 102,895 contracts - the largest since late January.
- Short-only positions in Nymex diesel rose by 1,854 contracts to 22,214, the highest since early March.