November 30, 2015 / 10:12 PM / 4 years ago

Hedge funds' bullish bets on U.S. oil hit five-year low on glut worry

(Reuters) - Hedge funds’ bullish wagers on U.S. crude oil have fallen to a more than five-year low, data showed on Monday, amid concerns that domestic oil output was not falling fast enough to offset a global supply glut.

The word oil is pictured on an oil bank at a recycling yard in London March 2, 2011. REUTERS/Stefan Wermuth

Money managers, including hedge funds and other big speculators, cut their net longs in U.S. crude oil futures by 39,159 contracts during the week to Nov. 24, data from the U.S. Commodity Futures Trading Commission (CFTC) showed.

That left the managed net long position in U.S. crude at 67,954 contracts, the lowest since July 2010, according to historical Reuters data tracking managed money positions issued weekly by the CFTC.

U.S. crude’s West Texas Intermediate (WTI) futures, as well as global oil benchmark Brent, have fallen from above $100 a barrel in July 2014 to trade just over $40 now.

Data from the U.S. Energy Information Administration on Monday showed no meaningful declines in domestic crude output in September.

The number of rigs actively drilling for oil in the United States have, meanwhile, fallen by two-thirds from a year ago to reach 555 last week, data from private industry firm Baker Hughes showed.

The lack of correlation between the plumbing rig rates and U.S. production has heightened traders’ worry that the global crude glut was likely to stay beyond the 2016 timeline predicted by some market pundits.

“The output response to the halving in crude prices during the past year has been a slow mover as the drop has been cushioned by increased efficiencies and cost reductions,” in exploration, said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates.

A Reuters survey on Monday estimated that OPEC production rose by 130,000 barrels per day (bpd) in November and that the group was pumping above its notional 30 million bpd target.

The Organization of the Petroleum Exporting Countries will hold its all-important policy meeting in Vienna on Friday.

OPEC has so far shown resolve to stick to the decision made at last year’s policy meeting to pump oil vigorously to protect its market share. This is despite financial strain on the policy’s chief architect, Saudi Arabia, and warnings that crude could fall to $20 a barrel.

Reporting By Barani Krishnan; Editing by Jonathan Oatis

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