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Money managers scale back bullish bets in NYMEX crude

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Money managers liquidated length in NYMEX crude futures the week ending April 3 after prices were unable to overcome a key resistance level, US Commodity Futures Trading Commission data showed Friday.

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The group's length fell 38,640 contracts to 454,856 contracts, while the short position increased 3,720 contracts.

Front-month NYMEX crude fell $2.04 week-on-week to $63.51/b. The contract has been stuck in the low-to-mid $60s, trading as high as $66.55/b March 26, falling 11 cents short of the three-year high set January 25. Running into resistance may have persuaded some traders to liquidate length, while others might have seen an opportunity to add bearish bets.

Money managers' net length declined 42,360 contracts to 421,064 contracts, according to CFTC data.



However, money managers remain heavily titled in one direction. The group's longs outnumber shorts by a ratio of more than 13 to one.

That has raised the possibility of downside risk in the event money managers rush to exit the market. Selling pressure could be exacerbated by the absence of enough speculative shorts to step in.

What has made this scenario even more relevant has been the increased volatility in global financial markets since February amid escalating trade tension between the US and China. Investors might also need to close out positions in the oil market to cover losses elsewhere, like equities or bonds.

Swap dealers' net short position fell 13,324 contracts to 637,978 contracts the week ending April 3, according to CFTC data.

The week-on-week change was driven by the short position dropping 14,635 contracts to 796,510 contracts. Length also fell, down by 1,311 contracts to 158,532 contracts. The short position held by swap dealers is seen as sign of heading activity by producers. Swap dealers serve as counterparties for over-the-counter transitions who then sell futures to offset their own risk.

The run-up in crude futures in late March seemed to motivate more hedging activity, with the swap dealers' short position rising 811,145 contracts the week ending March 27, the most since mid-February.

Producer/merchants' net short position was little changed, down 143 contracts to 86,586 contracts, CFTC data showed Friday. However, there were sizable increases in both longs and shorts. The group's length increased 23,147 contracts to 461,671 contracts, while the short position was up 23,004 contracts to 548,257 contracts. --Geoffrey Craig, geoffrey.craig@spglobal.com

--Edited by James Bambino, newsdesk@spglobal.com