April 24, 2015 / 10:22 PM / 4 years ago

Hedge funds bet most since July on U.S. oil price rise

NEW YORK (Reuters) - Hedge funds and other speculators have made their biggest bets since July that U.S. crude prices will rise, a sign of Wall Street confidence that the oil selloff that began 10 months ago may be nearing its end.

Pump jacks are seen in the Lost Hills Oil Field, California April 20, 2015. REUTERS/Lucy Nicholson

Data from the U.S. Commodity Futures Trading Commission (CFTC) on Friday showed the net long position in U.S. West Texas Intermediate (WTI) crude held by money managers rose by 40,994 contracts to 276,051 in the week ended April 21.

Reuters charts of CFTC data show that is the highest level in nine months for net longs, or positive wagers, on WTI held by such money managers, who include hedge fund operators and speculators.

“This data is consistent with the price rally we’ve been seeing in oil,” said John Kilduff, partner at New York-based energy hedge fund Again Capital. “Oil is back in favor and lots of folks are anxious to get in to what they see as a bottom to the market.”

After worries about a global glut drove oil markets down 50 percent from last June, crude prices seem to have found their footing in recent weeks.

WTI’s front-month contract surged from a six-year low of $42.03 a barrel in March to a 2015 high of $58.41 this week. It gained 27 percent over the past six weeks, rising about 20 percent in April alone.

Brent, the global benchmark for oil, surged from a near six-year low of $45.19 in January to a 4-1/2-month high of $65.80 on Friday.

Even so, oil producers and Wall Street are at odds on whether the slump is over, with financial investors betting the recovery will be quicker than the industry expects.

On Friday, Societe Generale raised its 2015 average price forecast for Brent by $4.33 to $59.54 a barrel and for WTI by $4.28 to $53.62..

Technical charts also show the current rally as yet to peak.

Tim Evans, energy futures specialist at Citi Futures in New York, said the CFTC data showed “short covering still dominant” in U.S. crude after the selloff.

Global oil supplies remain in a glut, with OPEC crude production outstripping demand by nearly 2 million barrels per day.

Some analysts caution that the price gains could encourage more U.S. shale oil production and a few oil majors are considering further spending cuts on exploration.

Editing by Grant McCool

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