Bloomberg: Hedge Funds Cut Bullish Gasoline Bets by Most Since 2006: Energy Markets

Hedge funds cut bullish bets on gasoline by the most in almost four years as petroleum stockpiles surpassed the highest level since 1990 and the U.S. vacation season drew to an end.

Hedge funds and other large speculators reduced wagers on rising prices by 74 percent the week ended Aug. 17, the most since October 2006, the Commodity Futures Trading Commission reported on Aug. 20. Gasoline has dropped 21 percent since reaching its 2010 high of $2.4351 a gallon on the New York Mercantile Exchange on May 3.

“People are just taking money off the table.” said Rich Ilczyszyn, a senior market strategist at Lind-Waldock & Co., a 45-year-old Chicago-based futures brokerage for institutional and individual investors. “We’re going to start trading down all the way to January.”

Inventories of petroleum have soared amid evidence the recovery from the deepest U.S. recession since the 1930s is faltering. Initial jobless claims rose to the highest level since November, the Labor Department said last week, while the Federal Reserve Bank of Philadelphia’s general economic index reached its lowest level since July 2009. Demand for petroleum products has declined 8.5 percent from a high in December 2007 when the recession began, according to the Energy Department.

Gasoline rose 0.47 cent to $1.9298 a gallon in electronic trading on the Nymex as of 6:32 a.m. in London, paring its decline in 2010 to 6 percent. Its lowest level this year was $1.8419 on Feb. 5. Gasoline may fall as low as $1.78, Ilczyszyn said.

More at Bloomberg