Oil price outlook: Investors have never been so bullish

Money managers’ short positions exceeded long bets by 12,680 lots in the week ended September 10, the first time this had happened in ICE Futures Europe data since January 2011. Hedge funds remained net bullish on WTI, although that position it was the lowest since February. Money managers trimmed their net Nymex WTI position to 105,024 lots, the CFTC’s weekly futures and options data showed.

Investors are increasingly worried about an oversupply of crude oil next year as non-OPEC countries increase production and demand from China and the US – the world’s biggest oil consumers – appears to be faltering.

The gloomy sentiment also spread to the refined goods markets. Money managers also turned in their worst run on diesel in nearly nine years, deepening their short position to 38,609 lots. Similarly, the gasoline net-long position was the least bullish in more than seven years, falling to just 5,193 lots. Money managers also increased their bearish bets on gasoline to a record net-short position of 64,461 lots.

Oil options trading and heavy selling from algorithmic traders helped push prices to a two-year low earlier this week. As bear bets increased and trading crowded out, some of those positions were liquidated later in the week, leading to a tepid price recovery.