Hedge Funds Dump Energy Stocks Rapidly as Oil Price Tumbles

Hedge funds dumped energy stocks last week, according to Goldman Sachs, which said the fall of oil prices as tensions eased in the Middle East spurred the second fastest exit in the last 10 years.

The price of crude slumped by over $10 last week following a ceasefire between Israel and Iran, with prices slipping on Friday on reports of increased supply from oil-producing group OPEC+ and staying well under the recent peak of around $81 a barrel.

Hedge funds, starting June 23, sold the stocks of energy-related companies across every major region, the Goldman note seen by Reuters on Monday said.

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Last week’s selling in the sector was the biggest in almost a year and the second largest in the last decade, the Goldman note, sent to clients on Friday, said.

Shares of oil, gas and consumable oil companies, plus as energy equipment and services firms were sold.

Hedge fund selling focused on every region but primarily on North America and Europe, said the note. In Europe, hedge funds added short positions and fled long bets, it said.

A short position expects asset prices to fall, while a long position expects it to rise.

While many increased short bets against energy companies, speculators’ total combined positions remained proportionately long on global energy stocks, data from the note showed.

Hedge fund gross leverage, a gauge of how many positions hedge funds have on, remains at a five-year high, said Goldman Sachs.

Last week saw the largest stock buying in five weeks, the note added, with hedge funds buying company shares in every global region, the bank said.

Stock sectors most bought included financial, tech and industrial companies, it said.