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Hedge Funds Bullish On Oil For 2018

Money managers increased their net bullish bets on Brent Crude to a record high last week, while net longs on WTI were close to a nine-month high, in a sign that fund managers believe that OPEC’s cuts will work to rebalance the market and oil demand growth will be robust next year.

The net long position in Brent—the difference between bets that Brent prices will rise and bets on a drop—jumped by 1.8 percent to a record-high 544,051 futures and options in the week ended December 12, Bloomberg reports, citing data by ICE Futures Europe. Bullish bets increased for a third consecutive week to a record-high, while short positions in Brent dropped by 2.2 percent. 

The net long position in WTI, on the other hand, went down by 0.4 percent to 390,874 futures and options last week, according to data by the U.S. Commodity Futures Trading Commission (CFTC) on Friday. Bullish bets declined by 0.9 percent, but short positions also dropped—by 5.1 percent, according to CFTC data quoted by Bloomberg.

Hedge fund managers were more bullish on Brent because of the Forties Pipeline shutdown early last week, which sent the Brent price surging.

“The U.S. remains kind of a big risk next year in terms of increasing supply, but the international picture is still pretty optimistic and pretty bright with OPEC controlling supply and demand strong,” Ashley Petersen, lead oil analyst at Stratas Advisors in New York, told Bloomberg in an interview.

Related: Saudi Deficit Narrows On Higher Oil Prices

For WTI and U.S. shale supply, last week OPEC said—for a second consecutive Monthly Oil Market Report—that U.S. oil production and non-OPEC oil supply growth “performed well above initial market expectations”, and revised up projections for non-OPEC supply growth for this year and next.

The International Energy Agency (IEA), for its part, said that while OPEC producers had decided to roll over the production cuts to the end of 2018, non-OPEC supply would increase more than previously expected, and total supply growth could exceed demand growth next year.

By Tsvetana Paraskova for Oilprice.com

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