Hedge funds and other money managers sold the equivalent of 66 million barrels in the six most important petroleum futures and options contracts over the seven days till January 2

Portfolio investors resumed selling petroleum futures and options, particularly those tied to crude, amid renewed doubts about growth in oil consumption in 2024.

Hedge funds and other money managers sold the equivalent of 66 million barrels in the six most important petroleum futures and options contracts over the seven days till January 2.

Sales were concentrated in crude (-63 million barrels), distributed almost equally between NYMEX and ICE WTI (-33 million) and Brent (-30 million).

There were only trivial sales of European gas oil (-5 million barrels), trivial purchases of U.S. gasoline (+1 million) and no change in U.S. diesel.

On the crude side, nearly all the sales came from the establishment of new bearish short positions (+59 million barrels), instead of the liquidation of existing bullish longs (-3 million).

Fund managers resumed the short selling that continued for ten weeks until December 12, when it was interrupted by two weeks of repurchasing before year end.

In the premier NYMEX WTI contract, short positions were boosted to 121 million barrels, not far below the earlier high of 128 million on December 12.

Before the end of the calendar year, short covering provided only limited price support. With the start of a new year, renewed selling has put them under downward pressure again.

Most funds are focusing on the threat to consumption from slow global growth rather than to production from conflict in the Middle East.

Rising production from Brazil, Guyana and U.S. shale plays is expected to be sufficient to satisfy less consumption growth in 2024.

Moreover, there is an assumption Saudi Arabia and its OPEC+ partners cannot or won’t cut output further to lift prices sustainably in the short term.

Cutting production again would simply throw another lifeline to rivals and concede even more market share.