The fast-evolving trade war has forced investors to overhaul their entire market view in a matter of days on several occasions. Hedge funds reversed their position on Brent oil at the fastest pace on record in the week ended April 8, figures from ICE Futures Europe show. Meanwhile, long-only bets on West Texas Intermediate fell to the lowest since 2009, compared with a six-week high a week prior, according to the Commodity Futures Trading Commission.
Since that data was calculated, Trump announced a 90-day halt on higher tariffs against dozens of nations, as well as an increase in duties on China to 145%.
While fleeing outright bets on crude, traders have been taking more spread positions, which offer more limited risk. Speculators added the largest number of spread bets in WTI since 2007 last week, while the equivalent positions in Brent climbed the most since 2020.
Signs also are emerging that oil consumers are seeking to avoid the volatility by locking in their single largest costs. Swap dealers added the most long positions in Brent and ICE gasoil on record last week, typically an indication of consumer hedging, as industrial buyers sought to sidestep the risk of heightened volatility in the longer run.
Another complicating factor for traders is that while big price drops may begin with a fundamental driver like tariffs, they can soon spiral further thanks to other factors like options markets and the positioning of trend-following funds.
Those funds, known as commodity trading advisers rushed to turn 100% short in WTI during the five days following the tariff-induced market meltdown, according to data from Bridgeton Research Group. Just prior to that swing, those firms had been looking to initiate long positions after steadily turning more bullish since March 28, the researcher added. That’s the most dramatic shift in positioning since the collapse of Silicon Valley Bank in 2023.
The months after the bank’s breakdown offered oil traders multiple opportunities to profit, with crude first plunging almost 20% before rebounding 40% to new highs for the year.
“Sideways-trending markets get boring,” said John Kilduff, a partner at Again Capital. “But where we’re at right now, there’s a new level of difficulty. If you’re a person who likes pain and tumult, you’re going to love this.”