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Hedge Funds Bet Oil Rally Extension Into 2017

Hedge Funds Bet Oil Rally Extension Into 2017Hedge Funds Bet Oil Rally Extension Into 2017

Investors are showing no sign of turning their backs on oil heading into 2017. Money managers’ wagers on rising West Texas Intermediate crude prices are triple what they were at the end of 2015, and are the highest since the start of the crude market crash two and a half years ago.  Crude futures settled at the highest in almost 18 months on Dec. 28, with investors now eyeing the Organization of Petroleum Exporting Countries and other producers to see who complies with agreed output cuts, Bloomberg reported.

Hedge funds boosted their net-long position, or the difference between bets on a price increase and wagers on a decline, by 0.6% in the week ended Dec. 27, US Commodity Futures Trading Commission data show. WTI increased 3.2% to $53.90 a barrel in the report week before settling at $53.72 in New York on Friday.

"We have a very confident positioning here," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a phone interview. "There’s plenty of hope that prices are supported and move higher and very little fear that compliance will be poor and prices will drop."

OPEC agreed to reduce its supplies by 1.2 million barrels a day, while 11 non-members including Russia and Kazakhstan pledged to curb output by almost 600,000 barrels.

Prices climbed this week amid signs that OPEC members will follow through with the promised cuts. Iraqi Oil Minister Jabbar al-Luaibi said his country was committed to cutting output by 200,000 to 210,000 barrels a day from the beginning of next month.

Venezuela will cut 95,000 barrels a day of production starting Jan. 1, the country’s oil ministry said in a statement earlier in the week. US oil companies had been using the rally to hedge their price risk for the next two years, potentially boosting output next year.

 

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