Oil Short-Selling Is Back in Time for Holiday Trade War Jitters

(Bloomberg) -- Oil short-selling has returned in time for renewed concern over the U.S.-China trade war and just as futures capped their worst month since May.

Hedge funds increased by 14% their bets that West Texas Intermediate crude will decline, following a three-week retreat, data released Friday show. The bearish stance came just in time for a last-day price slump that extended August’s drop 5.9% as China was set to impose a 5% tariff on American crude.

With news on the spat between the world’s two largest economies frequently breaking on a Saturday or Sunday, it also made sense for money managers to seek protection ahead of the long Labor Day weekend in North America.

U.S. President Donald Trump showed little sign that he’s going to back down, tweeting Friday that “weak companies” are to blame for their inability to cope with his policy aimed at reining in “unfair players.”

“Given Trump’s foreign policy, major buyers like China, are likely turning to alternative supplies rather than the U.S.,” said Michael Tran, a commodity strategist at RBC Capital Markets. “There’s little visibility for Trump’s tit-for-tat trade war which now includes U.S. crudes.”

Net-length in WTI -- the difference between wagers on an increase and those on a decline -- dropped 12% to 182,450 options and futures in the week ended Aug. 27, the U.S. Commodity Futures Trading Commission said. Long-only bets fell 6.8%.

To contact the reporters on this story: Carlos Caminada in Calgary at ccaminada1@bloomberg.net;Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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