Hedge funds have reduced their bullish stakes on crude oil to the lowest point in nearly 17 years. The diminishing risk of new sanctions on Russian crude has shifted attention back to concerns of oversupply.
According to CFTC data via Bloomberg, the net-long position of money managers in West Texas Intermediate futures declined by 19,578 lots, dropping to 29,686 in the week ending Tuesday. This marks the smallest position since October 2008.
Geopolitical Tensions Ease
Geopolitical tensions have eased, and multiple agencies are predicting that oil supply will exceed demand later this year. The U.S. is advocating for talks to end the conflict in Ukraine, which has decreased the likelihood of implementing new sanctions on Russian crude, despite lacking substantial progress towards peace.
We are seeing money managers hold the smallest net-long position in WTI crude since the financial crisis of 2008. This extreme positioning suggests a strong belief that oil prices are headed lower in the near term. The focus has clearly shifted from geopolitical risks to worries about a global supply glut.
Recent reports from the IEA confirm that global oil production is set to outpace demand by nearly 1.5 million barrels per day into the fourth quarter of 2025. Russian seaborne exports have also remained surprisingly robust, averaging over 3.3 million barrels per day throughout mid-2025. This steady flow removes a key pillar of support that had kept prices elevated.
On the demand side, slowing economic indicators, particularly China’s manufacturing PMI dipping below 50, signal weakening consumption ahead. This contrasts sharply with the optimistic demand forecasts we saw at the start of the year. Traders are now pricing in the potential for significant demand destruction if this global slowdown continues.
Market Positioning Strategy
In this environment, traders should consider positioning for further downside or sideways price action. Buying put options on WTI or Brent offers direct exposure to falling prices, while selling call credit spreads can generate income if the price stays below a certain level. We’ve observed a significant uptick in the put-to-call ratio for October and November 2025 contracts, confirming this bearish sentiment.
The last time we saw hedge funds this bearish was back in October 2008, just before a major price collapse linked to the global financial crisis. While the fundamental picture looks weak, such one-sided positioning can also create the conditions for a sharp rally if an unexpected catalyst emerges. Therefore, managing risk on bearish trades is critical, as a crowded trade can unwind quickly.
