* Fund managers dump long positions, bet on more price falls
* China's oil demand seen slowing - Barclays (L:BARC)
By Henning Gloystein
SINGAPORE, Jan 11 (Reuters) - U.S. crude oil prices were
down more than 2 percent in early trading on Monday as traders
increasingly lose faith in a significant market recovery soon
and bet on even lower prices.
U.S. crude West Texas Intermediate (WTI) CLc1 dropped more
than 2 percent in early Monday trading to a low of 32.43 per
barrel before edging back to $32.51 by 0038 GMT, still down 65
cents.
Global benchmark Brent LCOc1 was down 59 cents, also
almost 2 percent, to $32.96 per barrel.
Monday's falls add to an over 10 percent price drop in the
first trading week of the year and when Goldman Sachs (N:GS) said oil
could hit $20, and would see sustained low prices through the
first quarter "so producers will move budgets down to reflect
$40 a barrel oil for 2016."
In a sign that traders are losing faith in a price rise
anytime soon, big speculators have cut their net long positions
to fewer than 50,000 contracts or 50 million barrels in the week
to last Tuesday, a weekly report from a U.S. government agency
that tracks commodity markets activity showed on Friday.
At the same time, trading data shows that U.S. managed short
positions, which would profit from prices falling lower, have
risen to a record high (see graphic).
Oil prices have already fallen over 70 percent since the
downturn began in mid-2014 as soaring global production sees
hundreds of thousands of barrels of crude produced every day
without a buyer, leaving storage tanks filled to the rims.
Adding to overproduction is slowing demand, especially in
China where growth has slowed to its lowest rate in a generation
and experts see few signs of improvement for the next few years.
"Chinese oil data are finally starting to reflect weak
economic activity. Implied oil demand in China contracted 4.9
percent (537.3 thousand barrels per day) month-on-month and 2.0
percent (216.7 thousand barrels per day) year-on-year in
November, the first decline since July 2014," Barclays bank
said.
"We expect further compression in growth rates this year,
with an average of 300 barrels per day (2.7 percent)," it added.
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