FAST FIVE: Oil Market Hit By Tsunami Of Hedge Fund Liquidations
Oil Market Hit By Tsunami Of Hedge Fund Liquidations By John Kemp, Senior Market Analyst at Reuters Fears over the Omicron coronavirus variant's impact on international aviation and other sources of oil demand have prompted massive liquidation of previously bullish hedge fund positions.
Hedge funds and other money managers sold the equivalent of 131 million barrels in the six most important petroleum futures and options contracts in the week to Nov.
The one-week sale was the 13th largest in 455 weeks since the start of 2013 and was a result of Omicron fears converging with low levels of liquidity after the Thanksgiving holiday in the United States.
Bullish long positions outnumber bearish short ones by a ratio of 3.9:1 (48th percentile), down from 6.7:1 (84th percentile) eight weeks ago.
Omicron arrived in a market that was already trending down and served to turn gentle selling pressure into a flood at a time when low liquidity helped to create the conditions for prices to plunge.