OPEC+ is winning its war against short-sellers.
The coalition led by Saudi Arabia said that last week’s shock decision to slash oil production was intended to punish speculators and deter them from making unwarranted wagers against crude prices. If that was the rationale, then the latest data show the group succeeded.
Money managers slashed short-positions in Brent crude by 29,118 contracts in the week to April 4, the sharpest drop since 2020, according to data from ICE Futures Europe. In percentage terms, last week’s 46% reduction is the biggest in data going back to 2011.
The Organization of Petroleum Exporting Countries and its allies pledged more than 1 million barrels a day of cutbacks starting in May after fears over banking turmoil and faltering economic growth led to a pile-up of short positions, dragging crude prices down to $70 a barrel last month.
The market promptly recovered, with futures trading near $84 a barrel in London on Tuesday. While the move drew criticism from Washington amid concerns over resurgent inflation, the higher price levels should help many OPEC+ nations cover government spending.
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