Hedge funds sold U.S. energy company stocks at the fastest pace in five years and the sector was the most sold on Goldman Sachs’ prime brokerage trading desk last week, the bank said in a note sent to clients on Friday and seen by Reuters on Monday.
A short bet profits as asset prices decline.
U.S. energy companies tracked by the S&P energy index dropped almost 5% in the week to Sept. 26, but then rallied 1% on Friday after a subdued inflation report stoked hopes for more Federal Reserve rate cuts.
Hedge funds in the days preceding the Sept. 27 market rally put on bets against oil, gas and consumable fuels company stocks, as well as equipment and supply firms, said Goldman Sachs.
The proportion of short bets outpaced long positions roughly six to one, the bank note said.
Last week’s short selling in the sector was the largest in over five years, it said.
While selling last week reached a height, hedge funds had been dumping and shorting energy stocks for five straight weeks.
Analysts have cut their 2024 oil price forecasts for a fifth consecutive month, citing weaker demand and uncertainty over output plans from the world’s largest exporters, with prices expected to remain under pressure despite geopolitical risks, a Reuters poll found on Monday.
A Reuters poll of 41 analysts and economists conducted in the past two weeks projected Brent crude would average $81.52 per barrel in 2024, the lowest poll projection since February and down from $82.86 projected in August.
Both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have cut their forecasts, citing slower Chinese demand, with OPEC reducing its 2024 oil demand growth outlook for the second time.
(Reporting by Nell Mackenzie; Editing by Amanda Cooper and Sharon Singleton)