Opinion: Hedge funds turn bullish again on oil

Hedge funds and other money managers raised their combined net long position in the six most important petroleum futures and options contracts by 47 million barrels in the week to Sept. 4.  Anadarko photo.

Strong US economy, US crude production peaking, Iran sanctions boost hedge funds

By John Kemp

LONDON, Sept 10 – Hedge fund managers have turned bullish again towards crude and fuels, adding a significant number of new long positions in the last two weeks, after spending much of the previous four months liquidating positions.

Hedge funds and other money managers raised their combined net long position in the six most important petroleum futures and options contracts by 47 million barrels in the week to Sept. 4.

Fund managers have boosted their net long position by 172 million barrels in the last two weeks, after cutting it by 508 million barrels since April 17, according to regulatory and exchange records.

The most recent week saw portfolio managers add to net long positions in Brent (+28 million barrels), NYMEX and ICE WTI (+17 million), U.S. heating oil (+4 million) and European gasoil (+3 million).

Only US gasoline futures and options saw a small reduction in fund managers’ net long positions last week (-4 million barrels).

Net long positions in Brent have jumped by 92 million barrels since Aug. 21 while net positions in WTI are up by 45 million barrels over the same period.

Fund managers’ combined net long in Brent and WTI has risen to 803 million barrels, from a low of 666 million barrels just two weeks ago, and the highest since early July.

During the four months from late April to late August, position changes were led by the liquidation of old long positions rather than the creation of fresh shorts.

The last two weeks has seen that reversed, however, with the creation of new long positions leading the market higher.

With many stale long positions now liquidated, the US economy still growing strongly, signs of US drilling hitting a peak, and the imminent re-imposition of Iran sanctions, the hedge fund community is becoming bullish again.

John Kemp is a Reuters market analyst. The views expressed are his own.

(Editing by Hugh Lawson)