Oil prices were hit by an abrupt reversal of sentiment last week, with investors selling at the fastest rate for four months, as the economic outlook worsened and fears eased that the G7 price cap on Russian crude would disrupt its exports.

Hedge funds and other money managers sold the equivalent of 59 MMbbl of the six most important petroleum futures and options contracts in the week to Nov. 15, the fastest rate since the week ended July 5.

The selling came after fund managers had been buyers in five of the previous six weeks, purchasing a total of 169 MMbbl, according to exchange and regulatory position records.

The most recent week saw sales concentrated in Brent (-30 MMbbl) and NYMEX and ICE WTI (-19 MMbbl), with lighter sales in European gas oil (-5 MMbbl), U.S. gasoline (-4 MMbbl) and U.S. diesel (-4 MMbbl).

Investors had been steadily accumulating bullish long positions in petroleum, especially crude, expecting OPEC+ output cuts and the price cap to reduce supplies more than the economic slowdown reduces demand.

But that confidence was dented last week as the economic outlook across Europe and Asia worsened while traders became convinced the cap would have little impact on oil supplies owing to widespread avoidance and evasion.

At the same time, China grappled with the largest outbreak of coronavirus cases for six months, with no sign of an early exit from the cycle of lockdowns, which will continue to depress oil consumption.

As a result, Brent futures prices and calendar spreads retreated as traders prepared for a relatively hard landing for the global economy which will likely cut oil consumption absolutely or at least relative to the previous trend.