Hedge Funds Oil 2011

Hedge Funds Oil 2011

Hedge Funds Cutting Oil Bets Amid Japan Disaster

Hedge funds are responding to events in Libya and Japan by getting out of oil. Although the price of oil has risen hedge funds appear to be concerned over a short-term decline in demand in the wake of the earthquake in Japan. Still, there is a great degree of uncertainty with the Middle East remains unstable, the war in Libya and the disaster in Japan.
Following the devastating earthquake in Japan on March 11, the latest data from the US Commodity Futures Trading Commission shows the largest weekly decline in long positions since May 2010. From March 8 to March 15, hedge fund net long positions in oil decreased 13%.

Since February, hedge funds have piled into oil futures as civil unrest in the Middle East and North Africa disrupted global oil production, forcing the price of crude oil above $100 a barrel for the first time since Q3 2008.

But multitude of shocks to the global economy has made predicting future oil prices increasingly difficult. Prices for WTI crude oil fell in mid-March, over fears of a decrease in short-term Japanese demand - the country is the world's third largest oil consumer - but prices today broached $100 a barrel as the United Nations continued to impose a no fly zone across Libya.

In a recent note in Monday, Jim O’Neill, chairman of Goldman Sachs Asset Management said: “I have no idea where oil prices are going to go next.” Source

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