Post by jeffolie on Aug 20, 2007 14:52:04 GMT -6
Hedge Funds desperate to find cash for margin call unwind profitable position in gas and oil:
Oil and gas prices diverge as hedge funds cut bets By Javier Blas in London
The movement of crude oil and natural gas prices in the past two weeks has caught the energy market by surprise as hedge funds liquidate their positions en masse and cause a sudden change in the directions the prices, analysts say.
In the midst of a global credit squeeze, hedge funds have been cutting many of their bets on gas and oil, according to the latest data from the US Commodities Futures Trading Commission, the market regulator. This has resulted in oil and gas prices moving sharply in opposite directions.
The CFTC data also show, more broadly, that hedge funds have been significantly reducing their exposure to the energy markets.
Adam Robinson, energy analyst at Lehman Brothers in New York, says hedge funds are deciding to book profits in the energy market in order to offset losses in the equity and fixed income markets.
Many are also shrinking their outstanding positions to reduce leverage and exposure to risks to meet their margin calls needs, bankers and traders say.
Harry Tchilinguirian, senior energy analyst at BNP Paribas in London, says these hedge funds have been selling their "long" positions in oil - bets on prices rising - while buying back their "short" positions on natural gas - bets on prices falling.
According to CFTC data, speculators have cut their "long" positions on crude oil by as much as 36 per cent in the past two weeks, with the bulk of the reduction taking place last week.
That unwinding contributed to a drop of 8.6 per cent in oil prices, from $78.77 a barrel in early August to $71.98 last Friday.
Barclays Capital warns that oil prices could fall further in the short term "due to the potential for further large-scale speculative liquidation to take place".
news.yahoo.com/s/ft/20070820/bs_ft/fto082020071634179825;_ylt=AnS02zATsPIzlx4tVW_.RgKs0NUE
Oil and gas prices diverge as hedge funds cut bets By Javier Blas in London
The movement of crude oil and natural gas prices in the past two weeks has caught the energy market by surprise as hedge funds liquidate their positions en masse and cause a sudden change in the directions the prices, analysts say.
In the midst of a global credit squeeze, hedge funds have been cutting many of their bets on gas and oil, according to the latest data from the US Commodities Futures Trading Commission, the market regulator. This has resulted in oil and gas prices moving sharply in opposite directions.
The CFTC data also show, more broadly, that hedge funds have been significantly reducing their exposure to the energy markets.
Adam Robinson, energy analyst at Lehman Brothers in New York, says hedge funds are deciding to book profits in the energy market in order to offset losses in the equity and fixed income markets.
Many are also shrinking their outstanding positions to reduce leverage and exposure to risks to meet their margin calls needs, bankers and traders say.
Harry Tchilinguirian, senior energy analyst at BNP Paribas in London, says these hedge funds have been selling their "long" positions in oil - bets on prices rising - while buying back their "short" positions on natural gas - bets on prices falling.
According to CFTC data, speculators have cut their "long" positions on crude oil by as much as 36 per cent in the past two weeks, with the bulk of the reduction taking place last week.
That unwinding contributed to a drop of 8.6 per cent in oil prices, from $78.77 a barrel in early August to $71.98 last Friday.
Barclays Capital warns that oil prices could fall further in the short term "due to the potential for further large-scale speculative liquidation to take place".
news.yahoo.com/s/ft/20070820/bs_ft/fto082020071634179825;_ylt=AnS02zATsPIzlx4tVW_.RgKs0NUE