Hedge funds dump diesel as economic outlook darkens

LONDON, Jan 07 (Reuters): Hedge funds are cautious on the outlook for oil prices, despite a slump at the end of last year, as fears about the global economy outweigh output cuts by OPEC and its allies.

Fund managers cut bullish positions in Brent crude futures and options by 10 million barrels in the week to Dec 31, exchange data published on Friday showed.

Funds have cut their net long position in Brent to just 152 million barrels, down from almost 500 million at the end of September, and close to the lowest level since 2015.

Portfolio managers' bullish long positions outnumbered bearish short ones by a margin of just 2.5 to 1, down from a ratio of more than 19 to 1 at the end of September.

There are some signs the heavy liquidation of bullish positions between the start of October and early December has run its course, with Brent prices seeming to find a floor above $50 per barrel.

But most fund managers have preferred to wait before taking new long positions until the outlook for the global economy and equity prices becomes clearer.

Portfolio managers were even more bearish toward middle distillates such as diesel, jet fuel and heating oil, cutting their net long position in European gasoil by 9.0 million barrels.

Net length in ICE gasoil was cut to just 2.0 million barrels, down from a recent high of 112 million barrels in early October.

The ratio of long to short positions was cut to just 1:1, down from a peak of more than 30:1 less than three months ago, and the lowest for more than two years.