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Money Managers Boost Bullish Exposure to Crude Oil

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Net long positions in US crude oil fell massively in July but staged a modest rise in early August

As per data from the US Commodity Futures Trading Commission, there was a fall of more than 25% in the net long position held in WTI (West Texas Intermediate) crude oil for the week ended July 21, 2015. Long positions dropped to their lowest levels in two years while short positions rose 25%.  

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Indications of a bear market emerge

Towards the end of July, US crude oil fell by more than 20% compared to its June highs, conforming to a bear market’s conventional definition. US output is remaining at multi-decade highs while the market is oversupplied by record pumping from the largest members of OPEC (the Organization of the Petroleum Exporting Countries). Plus, concerns of a stronger dollar and slowing Chinese economic growth pushed commodity prices to their lowest levels in more than a decade.

US crude supplies much higher than five-year average

US crude oil production was almost 80 million barrels above the average production level over the past five years, as of May, as per data from the Energy Information Administration. Oil drillers increased the number of active rigs despite a slump in oil prices.

US oil producers are facing stiff competition from OPEC, which pumped record levels in June—the highest since August 2012. Iraq and Saudi Arabia are continuing to pump record levels of crude oil.

The shares of US oil and gas exploration and production firms Anadarko Petroleum (APC), Chesapeake Energy (CHK), ConocoPhilips (COP), and Devon Energy (DVN) continue to post weekly losses. Together, these firms account for 9.28% of the Energy Select Sector SPDR Fund (XLE).

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