Hedge funds raise bets on record low oil prices

HEDGE funds increased bearish oil wagers to a record as global equities fell and Iran was poised to add to the crude supply glut.

Oil dropped below $30 (R503) a barrel in New York for the first time in 12 years on January 12 amid concern that turmoil in China’s markets would curb fuel demand. Prices dropped further as the week progressed on signs that sanctions against Iran would be lifted, allowing a boost in crude shipments from Opec’s fifth-biggest member. The restrictions were removed at the weekend.

“There’s escalating recognition that any added production will prolong the surplus,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Oil is also down on worries about demand.

“The impact of concerns about China on all markets underscores worries about global economic growth.”

Speculators’ short position in West Texas intermediate (WTI) crude rose 15 percent in the week to January 12, data from the US Commodity Futures Trading Commission show.

It is the highest in records dating back to 2006. Net-long positions fell to the lowest in more than five years.

WTI slumped 15 percent to $30.44 a barrel in the report week on the New York Mercantile Exchange. Prices yesterday dropped as much as 3.6 percent to $28.36 a barrel, the lowest in intraday trade since October 2003, and changed hands at $29.38 as of 12.32pm in London.

The International Atomic Energy Agency concluded at the weekend that the Islamic Republic had curbed its ability to develop an atomic weapon as required under the July accord.

The US and five other nations agreed to lift the economic sanctions related to Iran’s nuclear programme.

Iran was targeting an immediate increase in shipments of 500 000 barrels a day, Amir Hossein Zamaninia, the Deputy Oil Minister for Commerce and International Affairs, said on Sunday. It planned to add another 500 000 barrels within months. – Bloomberg