Oil investors have been abandoning the market in waves following the latest market crash, with 19% of money managers dumping their oil holdings to record the largest dropoff in six weeks.
The dropoff comes after West Texas Intermediate prices fell for a third consecutive week, hitting $71.34 per barrel, previously briefly falling to their lowest level since late 2021 at $63.64 per barrel. Data from the U.S. Commodity Futures Trading Commission showed that WTI contracts dropped to 157,047 contracts in the week ended May 2.
For large periods oil speculators have been burned by their decision to keep backing bullish oil sentiment positions. In early April, speculators who were backing a decline in prices were blindsided by a surprise decision by OPEC+ to cut its daily oil output, thereby raising prices. In an effort to avoid further surprises, oil speculators have decided to remain on the sidelines.
Carley Garner, a Commodity Broker and Strategist at DeCarley Trading believes that the struggling oil market has the potential to be detrimental to other markets as well.
“We’re not there yet, but if oil drops below $63, it will cascade in other markets — even stocks,” Garner claimed. “Oil lures speculators when prices move higher. They need to see a more rational market.”