Centrum Stosunków Międzynarodowych - 01 August 2016: Hedge funds have made a record bet against oil in the history

The pessimism of the market in oil futures is growing. During the week to 26 July, hedge funds and large speculators increased their bets on falling prices for 38.896 million barrels reported the US Commodity Futures Trading Commission. The bid against oil was a record in a history of available stock statistics. For last two weeks there have been 66.5 million "papers" thrown out to market which are not provided by the physical delivery of barrels - these contracts are sold "in short run" for the sake of speculative play on lowering prices. Such drastic short sales were not fixed by CFTC even once in the past 7 years - neither after the Brexit, nor during the Euro Zone debt crisis, or after the historic decision of OPEC to refuse to reduce oil production in November 2014. Within two weeks the volume of bets of hedge funds versus oil rose by half and up to 3.5 times for last two months.

Almost all the major market players bet against oil: manufacturers’ volume of bets on the drop rate exceeds the growth rate at 252.5 million barrels, for swap dealers - at 73 million barrels.

According CFTC, small speculators bet on the prices grow. They hold a net long position in the amount of 189 million barrels.Since early June the cost of basic grades of "black gold" has fallen by 20% because of the overproduction of gasoline in the United States, Europe and China, and restoring of drilling activity in the US shale fields.

According to experts, the new target will be the level of 40 dollars per barrel, assuming still about 8% decrease.

“ China’s main offshore oil and gas producer CNOOC will lose more than $1 billion in the first half of this year because of low oil prices, it told shareholders in a profit warning.” China National Offshore Oil Corporation (CNOOC) for the first half of 2016 may record a net loss attributable to equity holders; on the basis of data already collected, it will be 8 million yuan(1.2 million dollars), against a year earlier profit of $ 14.733 billion yuan (2.2 billion dollars), the company said.

"The company would like to inform shareholders and potential investors that, according to the preliminary assessment of results of operations for the six months ended June 30, 2016 ... the company's operating results are expected to point to a loss for the six months ended June 30, 2016" - said in a statement.

These statements have not yet fully assembled and tested by auditors, so they are still subject to change, the company emphasizes. Final data statements for the first half of 2016 will be published in August.
The company attributed the expected loss is a decrease in the price of crude oil over the same period last year, as well as the depreciation of certain assets, including oil sands in Canada.

China National Offshore Oil Corporation - the third largest national oil company in China after CNPC and Sinopec. The company was founded in 1982. Headquartered in Beijing. CNOOC is engaged in mining, processing and sale of oil and natural gas in offshore China. The government of China owns 70% stake in the company.