Key Takeaways
- Hedge funds have significantly reduced their bullish bets on crude oil, with net-long positions on West Texas Intermediate (WTI) futures falling to their lowest levels since October 2008 in late August 2025.
- The bearish sentiment intensified, leading hedge funds to turn net short on NYMEX WTI futures for the first time in months as of September 2025, as oil prices plunged below $63 per barrel.
- This dramatic shift is primarily driven by a sharp increase in OPEC+ crude production, which jumped by 509,000 barrels per day (bpd) in August 2025, alongside a forecast of a 2.5 million bpd global surplus in the second half of 2025 by the International Energy Agency (IEA).
- Waning global demand, particularly from the U.S. and China, coupled with easing geopolitical risk premiums, further fueled concerns about oversupply in the market.
Hedge funds have aggressively cut their bullish wagers on crude oil, pushing net-long positions to levels not seen in over a decade, as the market grapples with a surge in supply and weakening demand. The latest data indicates a profound shift in sentiment, with money managers turning net short on NYMEX West Texas Intermediate (WTI) futures for the first time in months, signaling a strong bearish outlook on oil prices. This comes as WTI crude oil (CL=F) has recently traded around $62.20 per barrel, marking a nearly 2.0% decline on the day.
The primary catalyst for this retreat is the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decision to increase output. According to the OPEC Monthly Oil Market Report (MOMR) for September, OPEC+ production surged by 509,000 bpd in August, bringing total output to 42.4 million bpd. This increase, coupled with a trimmed demand growth forecast, has heightened fears of a significant market imbalance.
Further exacerbating the oversupply concerns, the International Energy Agency (IEA) released its September Oil Market Report, flagging a potential global surplus of 2.5 million bpd in the second half of 2025. The IEA also revised down its demand growth forecast to just 740,000 bpd, citing weakening consumption trends in advanced economies and soft refinery margins in Asia. This pessimistic outlook from key energy agencies underscores the challenges facing the oil market.
Money managers had pared back their net-long positions on WTI futures by 19,578 contracts to just 29,686 in the week ending August 19, 2025, marking the lowest net-long stance since October 2008. This reflects a broader trend where hedge funds have been consistently reducing their exposure to bullish oil bets amid fading geopolitical risk premiums and a growing consensus that supply will soon outstrip demand. Concerns over demand in major economies like the U.S. and China have also played a significant role in souring market sentiment.
The market is now closely watching for further developments, with some traders positioning for Brent crude (LCO=F) to potentially fall below $60 a barrel if the OPEC+ alliance agrees on a substantial hike in its upcoming meeting. The recent build in U.S. crude inventories, with a surprise 3.9 million barrel increase last week, further underlines sluggish end-of-summer demand and contributes to the bearish sentiment. This confluence of increased supply, reduced demand forecasts, and inventory builds paints a challenging picture for oil prices in the near term.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.