Hedge Funds Shrug Off Saudi Attack as Oil Demand Concerns Linger

(Bloomberg) -- The devastating attack on Saudi Arabian oil facilities fueled a record rise in crude futures, but hedge funds didn’t take the bait.

Money managers cut bullish bets on Brent oil by 3%, the first decline in three weeks, according to data released Friday.

Following the attack that briefly halted 5% of the world’s oil production, the global benchmark surged by the most ever. But supply concerns eased quickly as state-owned oil company Saudi Aramco reassured the market that it would still meet its commitments. Brent ended the week 6.7% higher, even as demand concerns re-emerged.

“People want to put their money in the bank now, they don’t want to see it all blown away,” said Kyle Cooper, director of research at IAF Advisors. The attacks don’t change the demand growth picture, he said.

Net-length in Brent -- the difference between wagers on an increase and those on a decline -- fell 3.1% to 284,653 options and futures in the week ended Sept. 17, the U.S. Commodity Futures Trading Commission said. Long-only bets dropped 2.5%, while shorts rose 0.2%.

Investors were more bullish on U.S. oil, with net-long bets up 6%. New pipelines coming online in Texas’s Permian basin have been supportive of the U.S. benchmark, as more crude is seen becoming available for export.

Still, demand worries are taking center stage as Saudi Arabia restores its lost production and the U.S.-China trade war persists. A Chinese trade delegation on Friday canceled a planned visit to American farms after President Donald Trump said he wasn’t interested in “a partial deal” with China based on Beijing increasing its purchases of U.S. agricultural products.

“Given demand worries, WTI prices ranging between $58-60 a barrel seems appropriate for now, said Bart Melek, head of global commodities strategies at TD Securities in Toronto. “Downward pressure will now be from demand.”

©2019 Bloomberg L.P.