Hedge funds are pulling out of bets that crude oil prices will rise in the short to medium term. With the market currently well supplied, investors are increasingly taking futures and options positions that could be profitable if oil prices decline further.

“Money managers cut net-long positions, or wagers on rising prices, for benchmark West Texas Intermediate crude by 8.6 percent in the week ended Jan. 7, U.S. Commodity Futures Trading Commission data show. It was the biggest decline since June. Short positions gained the most since April…”

“Net-long positions in WTI crude declined by 23,209 futures and options combined to 247,177, the lowest level since the week ended Dec. 3. Long positions slipped by 7,987 futures and options combined, while shorts surged by 15,222, or 53 percent…”

“It’s interesting that the pickup in short interest was the bigger part of the flow,” said Tim Evans, an energy analyst at Citi Futures in New York. “It was a bear raid as they came in to short the market.”- Bloomberg