Hedge funds boosted their bullish bets on US crude oil for the third week in a row to a more than two-year high, data showed on Friday, as non-Opec countries raised expectations of a joint effort with Opec members to cut output. Money managers raised their net long US crude futures and options positions in the week to October 11 to the highest since late July 2014, just after the two-year price rout began, US Commodity Futures Trading Commission (CFTC) data showed.
The speculator group raised its combined futures and options position in New York and London by 38,690 contracts to 292,083 during the period. Oil prices during the time jumped more than 4 percent and Brent crude hit a one-year high on October 10 after Russia said it was ready to join Opec in curbing crude output and Algeria called for similar commitments from other non-Opec producers.
"It's pretty clear that we continue to attract speculative length on the long side because of the expectation of the rebalance of the market that's going to occur not only because of the drop in North American production but now with the added expectation that Opec and possibly even Russia cutting back on their output levels," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. To get to $55-$60 per barrel prices, the market will need fundamental proof like inventory levels dropping and clarity that demand has picked up, McGillian said.
Crude has rallied over the last couple of weeks after the Organization of the Petroleum Exporting Countries aimed to agree on cutting about 700,000 barrels per day (bpd), bringing its output to 32.5 million-33.0 million bpd by its policy meeting in Vienna on November 30. The group has since said its production rose in September to the highest in at least eight years. It also forecast a rise in 2017 non-Opec supply. On Friday, oil prices fell slightly as investors weighed a stronger dollar and another increase in the US oil rig count against hopes that more Opec talk of output cuts would support crude above $50 per barrel. Bullish bets on RBOB gasoline also rose, data showed on Friday, jumping to the highest levels since March 2015.
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