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End-of-Summer Blues Drop Bullish Oil Bets Into Eight-Month Low

Carlos Caminada and Sheela Tobben

(Bloomberg) -- As temperatures cool, so does enthusiasm for oil.

With the end of the summer-driving period taking away a key factor supporting demand, hedge fund bets on a crude price rally in New York and London have plunged to the lowest in eight months, data released Friday show. Meanwhile, U.S. gasoline consumption is at its lowest since March.

“We are heading into a seasonally weak demand period,” said Rob Haworth, who helps oversee $151 billion at U.S. Bank Wealth Management in Seattle. “The biggest driver is gasoline consumption.”

The prospect of less crude being processed into fuel in the coming months comes amid mounting concern that global growth is slowing down, with the U.S. and China locked in a tit-for-tat trade war.

West Texas Intermediate futures in New York and Brent crude in London have slumped more than 15% since an attack on Saudi premises sent prices surging in mid-September.

The combined net-bullish position on both benchmarks, or the difference between wagers on a their rally and bets on their rout, shrank 17% to 388,710 futures and options in the week ended Oct. 1, according to data from the U.S. Commodity Futures Trading Commission and ICE Futures Europe. That’s the least bullish since February.

Further price declines may put Saudi Arabia and Russia in the tough position of weighing further production cuts that would compromise their market share.

“Can they afford to cut more?” Haworth said. “That will be determined by prices.”

To contact the reporters on this story: Carlos Caminada in Calgary at ccaminada1@bloomberg.net;Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, ;David Marino at dmarino4@bloomberg.net, Reg Gale, Joe Carroll

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