Hedge Funds Grow More Bullish On U.S. Crude Oil

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By Tsvetana Paraskova

Money managers reduced their bullish bets on the six most important petroleum contracts, but they bought more WTI Crude futures in the week to May 25 amid strong fundamentals for the U.S. benchmark, according to exchange data compiled by Reuters market analyst John Kemp.

In the latest reporting week, hedge funds and other portfolio managers sold the equivalent of 8 million barrels in the six most important petroleum contracts, marking the third week of an overall reduction in the net long position—the difference between bullish and bearish bets. The pace of the reduction in the longs, however, was much slower in the latest week than in the prior weeks, and the WTI Crude contract actually attracted more bullish bets.

Hedge funds bought the equivalent of 10 million barrels in WTI, while they sold the equivalent of 12 million barrels in Brent Crude futures and options, according to the data compiled by Kemp.

Despite the recent reduction in the net long, the market continues to be bullish overall on oil prices as longs outnumber shorts by a ratio of 4.86 to 1, Kemp’s estimates show.

In the week to May 25, money managers boosted their long positions on WTI Crude buying 18,000 lots and sold Brent, thus cutting the combined net long position on crude oil futures to 624,000 lots—the lowest net long since January, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Monday, commenting on the Commitment of Traders reports.

“WTI bets rose in response to rising US fuel demand, low gasoline and Cushing oil stocks while Brent, the global benchmark, saw net selling due to the risk of rising Iranian production together with virus outbreaks in Asia curbing demand,” Hansen noted.

Early on Tuesday, oil prices were rallying as the OPEC+ group was meeting and widely expected to confirm the plan to raise collective production by 840,000 barrels per day (bpd) in July. WTI Crude was surging by 3.5 percent at $68.65 at 10:29 a.m. EDT, and Brent Crude was up 2.55 percent to $71.01.

Crude Oil

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