No Surprise: Traders are Bearish on Oil

The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, are off an average of 16.5% year-to-date. Recent price action in those exchange traded products and oil itself is giving traders little reason to believe a rebound for the commodity is imminent.

Not surprisingly, data suggest professional traders have been turning increasingly bearish on oil while trimming their long exposure to the commodity.

Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices. Rig counts have recently ticked higher and with credit and earnings issues improving for some U.S. shale drillers, those companies may seize the opportunity to exploit higher pricing in the near-term.

“Before West Texas Intermediate crude nosedived on Thursday, wiping out the rally driven by OPEC’s deal, money managers slashed bets on rising prices by 20 percent, according to U.S. Commodity Futures Trading Commission data. Now they may soon be well poised to start betting on the next rally,” reports Bloomberg.