Hedge funds cut bullish bets on U.S. crude to July lows

By Barani Krishnan

(Reuters) - Hedge funds cut their bullish wagers on U.S. oil by the most since July this week, trade data showed on Friday, after a tumble in gasoline prices, slower growth in China and worries about an impending return in Iranian crude exports to the market.

U.S. crude prices fell almost 4 percent in the first two days of this week, prompting hedge funds and other big speculators to pare net longs by around 11 percent in the week to Tuesday, the data from the U.S. Commodity Futures Trading Commission showed. Net longs are bets that the price of oil will rise.

The so-called "money managers" tracked by the CFTC had raised their net longs on U.S. crude in two prior weeks as signs of declining U.S. shale output raised the possibility that prices may rebound from the lows of earlier months.

"The reduction in net length is indicative of the waning bullishness in this market," said Matt Smith, commodity research director for the New York-based energy consultancy and database ClipperData.

According to the data, the managed money net length across several U.S. oil markets fell by 18,195 contracts to 160,711 in the week to Oct. 20.

Oil prices had moved higher earlier this month on concerns about declining North American shale output. U.S. crude broke out of a weeks-long trading range below $50 a barrel that sent net longs up.

But crude markets turned lower again after that on OPEC data showing record pumping of oil by the world's largest producers.

"We didn't hold above $50 this week, so the longs took their losses," said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in Laurel Hollow, New York.

U.S. gasoline prices tumbled to January lows this week, adding to the sell-off in crude oil, as traders feared an impending build in motor fuel supplies as refineries came out of their maintenance season for autumn.

Latest weekly data for gasoline stockpiles showed a 1.5-million-barrel decline versus analysts' expectations for a 858,000-barrel drop. Still, gasoline prices dropped 2 percent this week.

Losses in crude steepened after data pointing to the slowest pace of growth in six years for the Chinese economy during the third quarter.

Iran also expressed hope of implementing a nuclear deal with the West this year, boosting oil production by 500,000 barrels a day within a week of having trade sanctions against the country lifted.

(Reporting By Barani Krishnan; Editing by Nick Zieminski and Bill Rigby)

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