Hedge funds take profits on bearish bets on oil

Speculative positions on West Texas Intermediate crude oil fell sharply last week, according to the latest data from the US Commodities Futures Trading Commission, as hedge-funds took profits following the recent crash in prices.

'Short' positions by speculators fell by 16,782 contracts to 184,193 futures and options, the figures from the CFTC revealed.

So-called 'long' positions, which stand to benefit should prices rise, were also trimmed, but by less, decreasing by 4,580 to 266,150.

That saw futures rip higher at the end of last week from the 12-year lows plumbed earlier the same week.

Some market commentary said speculation that the cycle of monetary policy tightening by central banks around the world might be less aggressive was the trigger for the move.

The European Central Bank and Bank of Japan were now seen adding further to stimulus and the US Federal Reserve raising interest rates by less.

On 20 January, the WTI front-month contract closed the session at $26.55 per barrel, its lowest mark since May 2003, only to afterwards register its largest two-day advance since September 2008.

To take note of, for some pundits the precipitous drop in energy quotes around the world had forced some sovereign wealth funds to sell some of their equity holdings to help finance the resulting deficit in their home countries.

"Absent further macro deterioration or other bearish factors, and given the extreme levels of short positioning, the market may experience a temporary turnaround," Barclays said in a research report sent to clients.

The broker´s analysts also pointed to inflows into the four biggest oil exchange-traded products - and how interest for 'call' options had jumped - as possible early signs that the downward 'snowball' of bearish factors in the price of crude oil was slowing down.

As of 08:08GMT front month WTI futures were down by 0.81% to $31.93 per barrel on the ICE.