Investors selling off investments in oil futures over recession fears

Hedge fund managers are selling off oil futures amid fear that projected recession could cause demand for the commodity to drop, thereby, reducing the value in the global market.

Investors trade in oil futures by agreeing to sell or buy crude oil at a certain date and particular price, which is often more than the cost at the period of agreement.

However, with recession fears gripping the oil market, oil futures traders are dumping their holdings to prevent their investment from losing value as a result of potential economic downturn.

According to ZeroHedge, via crude price tracker, Oilprice, about 201 million barrels have been sold in the past four weeks, with 110 million barrels offloaded last week among futures’ contracts.

A breakdown of the sales for last week disclosed futures contracts experienced a sell off in Brent by -54 million barrels, NYMEX and ICE WTI reporting a dip of -41 million, while in other quarters, U.S. gasoline and European gas fell by -8 million and -7 million respectively.

It was reported that last week’s sell off saw bullish long positions down by -71 million barrels, as against bearish shorts (those betting that the oil price will fall) rising 39 million barrels.

Meanwhile, Ripples Nigeria had earlier reported that the Organization of the Petroleum Exporting Countries (OPEC) projected a slow growth in demand, 3.36 million barrel per day (bpd) in 2022, to 2.7 million bpd the next year.

This is despite stating that the average demand will rise to 103 million in 2023, from 100.29 million bpd expected this year.