(Bloomberg) -- Hedge funds are bracing for more trouble in the oil market, even after crude rebounded for a second week on hopes the coronavirus outbreak’s threat to economic growth is waning.
Bets against West Texas Intermediate crude increased by 11% to the highest in four months during the week ended Feb. 18, data released Friday showed. That puts oil short-selling at more than triple the level at the start of the year.
“Everyone is still trying to figure out what’s going to happen with the coronavirus,” said Mark Waggoner, president of commodities brokerage Excel Futures. “Under normal circumstances, they would be buying but there’s fears the virus could expand.”
News of the epidemic that began in China, the world’s largest energy buyer, sent oil prices in New York on a nosedive below $50 a barrel this month from more than $65 in early January. Crude has since risen to around $53 but concerns are lingering and futures stumbled anew on Friday.
Shifting infection tallies in China are eroding public trust in official numbers, and virus cases are spreading in Japan, South Korea and the Middle East. In the U.S., a key gauge of business activity dropped to the lowest since October 2013 as the outbreak hits supply chains and makes firms hesitant to place orders.
Money managers’ WTI net-long position, or the difference between bullish and bearish bets, dropped 22% to 95,536 contracts, the lowest since October, according to data released Friday by the U.S. Commodity Futures Trading Commission. Long-only wagers fell 6.7%.