Short selling in U.S. energy sector surges as oil prices fall

A crude oil train moves past the loading rack at the Eighty-Eight Oil LLC's transloading facility in Ft. Laramie, Wyoming July 15, 2014. REUTERS/Rick Wilking

(Reuters) - Short selling in the S&P 500 energy sector rose in November to its highest level in years, outpacing that of the benchmark S&P 500 index as crude oil prices continued to tumble amid a global glut, according to Markit data.

On average, 5.5 percent of the shares in the S&P energy sector were on loan for the five weeks ended Dec. 3, compared with an average of 2.98 percent for the broader S&P 500 over the same period.

In the preceding five weeks through Oct. 29, about 5.2 percent of energy shares were on loan on average, against 3 percent for the S&P 500. In the five weeks ended Sept. 29, 5.1 percent of energy shares were on loan, versus the S&P’s 2.8 percent.

In comparison, energy sector shares on loan averaged 2.5 percent, compared with 2.1 percent for the broader S&P in roughly the same 15-week period late in 2014.

Before August 2014, the percentage of energy sector shares on loan trended lower than that of the S&P 500.

“There’s a growing number of people positioning for further pain in the energy sector,” said Markit analyst Simon Colvin, estimating that energy short sellers are now “the most eager” they have been in years. Markit’s data goes back to early 2012.

Data from rival service FactSet Research Systems shows 6.6 percent of S&P energy sector shares were sold short for the last two weeks of November. It showed a peak short-interest level of 6.8 percent from mid-September to mid-October.

The S&P energy sector is on track for a 21.8 percent decline for 2015, while the broader S&P is on track to end the year barely down.

U.S. crude oil futures hit a 2014 peak of $107.73 a barrel and a low of $52.44, and dropped to a 2015 low of $36.42 on Dec. 10, its lowest level since February 2009.

Reporting by Sinead Carew in New York; Editing by Bernadette Baum and Matthew Lewis