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Hedge funds bet oil will fall further

Hedge funds bet oil will fall further

Hedge funds boosted bearish wagers on oil to a four-year high as US supplies grew the most since 2001. Money managers increased short positions in West Texas Intermediate crude to the highest level since September 2010, in the week ended January 20, US Commodity Futures Trading Commission data show.

Net-long positions slipped for the first time in three weeks.

US crude supplies rose by 10.1 million barrels to 397.9 million in the week ended January 16 and the country will pump the most oil since 1972 this year, the Energy Information Administration says.

Saudi Arabia’s King Salman, the new ruler of the world’s biggest oil exporter, said he will maintain the production policy of his predecessor despite a 58 percent drop in prices since June.

WTI rose 50 cents, or 1.1 percent, to $46.39 a barrel on the New York Mercantile Exchange during the CFTC report period.

Salman Bin Abdulaziz Al Saud ascended to the throne after King Abdullah died last week. The kingdom pumped 9.5 million barrels a day in December as members of the Organisation of Petroleum Exporting Countries exceeded their 30 million-barrel daily target for a seventh month.

Production in the US will be slow to decline as improvements in drilling technology boost well output even as companies drill less.

Read also: Hedge funds burned by Fed set to unwind bearish rate positions

Oil production per rig from new wells in the Bakken in February will be double what it was three years ago, the EIA said January 12.

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

Drillers idled 49 US oil rigs last week, bringing the total to 1,317, the lowest level in two years, Baker Hughes Inc., said on its website January 23. It was the seventh weekly decline.

Short positions in WTI increased by 6,262 contracts to 94,203 futures and options in the week ended January 20, CFTC data show.

Retail gasoline, averaged nationwide, slid to $2.033 a gallon January 25, the lowest since March 2009, according to Heathrow, Florida-based AAA, the largest US motoring group.

Bearish wagers on US ultra low sulphur diesel increased 2.3 percent to 29,943 contracts, the most since the period ended November 4.

The fuel slipped 0.4 percent to $1.6266 a gallon in the report week. Net-short wagers on US natural gas decreased 32 percent to 11,967 lots.

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures US Henry Hub contract. Nymex natural gas dropped 3.8 percent to $2.831 per million British thermal units during the report week.