Hedge funds cut their bullish positions in petroleum last week for the second week running as anxiety about the slowing global economy and oil consumption trumped optimism over production restraint by OPEC and its allies.

Hedge funds and other money managers reduced their net long position in the six major petroleum futures and options contracts by 35 million barrels (MMbbl) in the week to Aug. 13, having cut it by 25 MMbbl the previous week.

Portfolio managers last week sold Brent (37 MMbbl), U.S. gasoline (15 million), U.S. heating oil (9 million) and European gasoil (4 million) as the consumption outlook deteriorated.

By contrast, funds bought NYMEX and ICE WTI (30 MMbbl) as new pipelines from the Permian Basin to the coast reduced congestion near the oilfields and supported local prices.

Overall, fund managers have cut their net long position in the six major contracts to only 543 MMbbl, down from a recent peak of 911 MMbbl in April and the lowest total since June and before that February.

If “structural” long and short positions (minimum levels of long and short positions, which never change) are excluded from the analysis, fund managers are running a dynamic net long of only 52 MMbbl.

The hedge fund community now holds a basically neutral position on petroleum prices, with the global economy replacing U.S. sanctions against Iran and Venezuela as the dominant theme this year.

Falling oil prices have prompted Saudi Arabia and its allies in the OPEC+ group to extend their production restraint until at least the end of the first quarter of 2020.

Low prices are also forcing a slowdown in the drilling and completion of new wells in the U.S. shale fields, which should eventually result in slower production growth.

But consumption growth is decelerating even more quickly, with most major advanced economies and emerging markets now either in recession or on the brink of it.

From a positioning perspective, the balance of risks has probably shifted to the upside, with plenty of room for hedge fund managers to add more bullish long positions and cover existing bearish shorts.

From a fundamental perspective, however, the balance of risks remains tilted to the downside, with the global economy losing momentum and oil consumption growth slackening.

If positive news emerges about the economy, oil prices are primed to rally, but such news is sparse and prices remain under pressure.