Investors around the globe are said to have ‘jettisoned’ leveraged oil and switched to short the commodity following the announcement from the Organisation of Petroleum Exporting Countries (OPEC) that it will cut production.
A report from WisdomTree’s latest short and leverage report has made the findings.
Their findings have shown oil markets have taken centre stage in recent weeks after OPEC confirmed in late September that its members have reached an agreement to curb production.
The cut, scheduled for November, will be its first since the oil price declined globally two years ago.
Prices have increased in reaction, with WTI crude moving from $45 per barrel prior to the announcement.
However since mid-October prices have been trading up by around 15%.
The spike has been used by investors to take a spike in profits with some $850million withdrawn from leveraged long oil Exchange Traded Commodities globally tracking WTI since late September.
WisdomTree’s Boost range has mimicked this trend, with £44m being withdrawn from long leveraged products in October alone, while its short WTI products have seen inflows of £19m month-to-date.
Nick Leung, Research Analyst at WisdomTree, said: “The OPEC announcement has sparked a very clear move by short and leveraged investors globally, with contrarian long investors using the jump in price to lock-in gains as short investors increase their bets.
“While long-only investors have benefited from the planned cut to production, seeing double-digit gains, we do not see this as the start of a prolonged bull market for oil.
“Instead, this is a recalibration for oil from very depressed levels. We would not expect oil prices to retreat from here significantly, but equally we do not see them surging back to levels seen prior to the great crash of 2014 when the commodity traded above $100 per barrel. There is still a glut of oil supply globally with significant inventory levels still needing to be drawn down, so until either demand jumps or production falls significantly, prices are unlikely to move sharply in either direction.”
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