Hedge funds are now taking a contrarian stance on oil stocks while reducing their short positions on solar, marking a significant shift in the energy strategies that have prevailed over the last four years. Since the beginning of October and through the second quarter, equity-focused hedge funds have, on average, maintained a predominantly short position in oil stocks, as indicated by a  analysis of positions in companies across global indexes for sectors including oil, wind, solar, and electric vehicles. This marks a significant shift in investment strategies that have prevailed since 2021, as indicated by the data derived from fund disclosures to Hazeltree, a specialist in alternative-investment data.

During this timeframe, there has been a notable unwinding of short positions in solar stocks by various funds. The analysis, which encompasses a sample of approximately 700 hedge funds with around $700 billion in gross assets, indicates that portfolio managers have maintained a net long position in wind during this timeframe. According to Todd Warren, portfolio manager at Tribeca Investment Partners, there has been “a bottoming out with some of these clean energy plays.” The observed trend has “really occurred at the same time as we’ve seen – in the oil patch – some concerns with regards to supply and demand balance,” he stated.

The analysis indicates that, on average, hedge funds maintained a net short position in stocks within the S&P Global Oil Index for seven out of the nine months commencing October 2024, rather than a net long position. In contrast, net longs surpassed net shorts in all but eight of the 45 months spanning from January 2021 to September 2024. The development aligns with an increase in oil supply, as certain OPEC member nations take measures to maintain their market share. Joe Mares, a portfolio manager at Trium Capital, a hedge fund managing approximately $3.5 billion, observes that increasing output has “not historically been great” for the oil industry. Indicators suggest a deceleration in economic activity within the US and China, alongside projections that global oil inventories are likely to increase throughout the remainder of 2025, leading to heightened skepticism regarding the sector.

As investors absorb the implications of “the general slowdown in everything,” the critical inquiry shifts to, “who’s buying the oil?” Kerry Goh, Singapore-based chief investment officer at Kamet Capital Partners, stated. Tall Trees Capital Management LP, located in Greenwich, Connecticut, is taking a short position on oil stocks as “we see much lower oil prices, especially in 2026,” stated Lisa Audet, the fund’s founder and chief investment officer. Market participants could gain additional understanding of the supply-demand dynamics as soon as this week, with OPEC preparing to publish its monthly market analysis. Updates are also anticipated from the US Energy Information Administration and the International Energy Agency.