Hedge funds slash U.S. crude longs as OPEC dithers on cuts

(Reuters) - Money managers have cut their bullish holdings in U.S. crude the first time in five weeks, data showed on Friday, after back-and-forth talk by OPEC members raised doubts on the producer group’s ability to trim a global oil glut.

U.S. crude prices hit 15-month highs on Oct. 19, reacting to the first planned output reduction in eight years when the Organization of the Petroleum Exporting Countries meets in Nov. 30. They fallen since, to three-week lows Friday, as key OPEC members sought exemption from the cuts.

Money managers, including hedge funds and other speculators, reduced their combined futures and options holdings on New York-traded West Texas Intermediate (WTI) crude by 27,653 contracts to 268,978 during the week ended Oct. 25, the U.S. Commodity Futures Trading Commission reported.

That was the first slash in bullish bets held by the group on WTI since the week ended Sept. 20.

“With the market still at least moderately overbought, we see potential for further selling,” said Tim Evans, energy futures specialist at Citi Futures in New York.

Managed money’s net long positions in U.S. gasoline futures and options, meanwhile, jumped to 40,730 contracts, the highest since early March 2015, CFTC data showed. Fund interest in gasoline spiked due to reduced volumes of the fuel transported by the Colonial Pipeline since an outage in September.

OPEC said on Sept 27 it hoped to reduce some 700,000 barrels per day of oil from global markets estimated to be oversupplied by 1.0-1.5 million bpd.

Since that announcement, positive rhetoric by OPEC members helped lift WTI by 16 percent to a July 2015 high of $51.93 a barrel on Oct. 19. On Friday, U.S. crude futures settled down 2 percent at $48.70. For the week, it lost 4 percent, its biggest such slide since mid-September.

OPEC officials meeting in Vienna ahead of the Nov. 30 meeting have yet to work out the details of the production cut, amid objections by Iran which has been reluctant to even freeze its output. Iraq, OPEC’s second-biggest producer, also wants to be exempted from curbs.

“After a month of talking, OPEC has gotten nowhere to convincing its members to take enough oil off the market and there’s just another month for its target date for cuts to begin,” said Phil Davis, crude trader at PSW Investments in Woodland Park, New Jersey.

“My belief is we won’t get any solid commitments anytime soon from OPEC members and WTI possibly will go below $47.50 by next week and probably under $40 if nothing happens by end November,” said Davis, who shorted U.S. crude when it got to $51.

Additional reporting by Devika Krishna Kumar; Editing by Chris Reese, Bernard Orr