Hedge Funds Are Trimming Their Long Oil Bets, Adding Short Exposure

Oil's slump below $50 per barrel coincided with hedge funds fleeing their long oil bets. According to a Bloomberg report, hedge funds lowered their WTI net-long positions by nearly 3 percent for the week ending March 7.

The net-long position, which fell by 11,149 futures and options to 375,558, is also notable because it marks the first two-week decline seen since November. Long positions also fell 2.5 percent while short positions advanced 0.5 percent.

"The volume and breadth of the decline this week show that there was massive liquidation," John Kilduff, a partner at the energy-focused hedge fund Again Capital, told Bloomberg.

The reason for the not-so-bullish view on the commodity stems from an OPEC agreement which called for a reduction in oil output to boost oil prices higher. The agreement also saw support from non-OPEC members and achieved its objective of supporting oil prices for a few months. But rising stockpiles in the U.S., particularly last week's massive inventory build, and soaring drilling rigs is putting a damper on the sustainability of oil' prices.

"There's been a loss of confidence," Tim Evans, an energy analyst at Citi Futures Perspective, told Bloomberg. "The fourth consecutive U.S. crude inventory record might have helped send them for the exits and the admission of Khalid Al-Falih that inventories weren't falling as much as anticipated also caught their attention."

Also not helping the case for oil is shale billionaire Harold Hamm who said during a recent energy conference that the U.S. energy industry could "kill" the oil market.

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