In the week ending 5 Aug, the two major crude oil benchmarks (Brent and WTI futures) declined sharply, reversing the bullish sentiment from the previous week. The market focused on economic headwinds, increased supply. The bearish catalyst was on Friday, 1 Aug, amid a weak US jobs report and a large contraction in factory activity, which raised demand concerns. In addition, OPEC+ announced a complete unwinding of its 2.2mb/d of voluntary cuts, by notionally raising its output by 547kb/d in September. Buoying bearish sentiment, US-Russia talks on Ukraine have exerted downwards pressure on prices, raising expectations for a potential end to sanctions.
Combining the benchmarks, money managers adopted a risk-off attitude, where long positions declined by 37mb (-7%) and shorts fell slightly by 1mb (-0.7%). The long:short ratio declined from 2.94:1.00 to 2.76:1.00, the same level as two weeks prior, and at the 24th percentile for all weeks since 2013. Meanwhile, net positions declined by 10% w/w from 347mb to 312mb, marking its lowest level since the week ending 3 June.
