Hedge funds in­crease oil bets most in eight weeks

The Pak Banker - - Company& -

NEW YORK: Hedge funds in­creased bets on oil by the most in eight weeks as signs that the global eco­nomic re­cov­ery is gain­ing pace stoked spec­u­la­tion de­mand for crude will rise.

The funds and other large in­vestors boosted so-called net-long po­si­tions, or wa­gers that oil prices will climb, by 18 per­cent in the seven days ended Nov. 30, ac­cord­ing to the Com­mod­ity Fu­tures Trad­ing Com­mis­sion's weekly Com­mit­ments of Traders re­port. It was the largest in­crease since the week ended Oct. 5. Oil rose 6.5 per­cent last week and the Stan­dard & Poor's 500 In­dex ad­vanced 3 per­cent af­ter re­ports showed man­u­fac­tur­ing grew in Europe and China, and Gold­man Sachs Group Inc., JPMor­gan Chase & Co. and Deutsche Bank AG in­creased their oil price fore­casts for 2011 and 2012. OPEC will meet Dec. 11 in Quito, Ecuador, to re­view out­put quo­tas.

"Over the last cou­ple of weeks sen­ti­ment has changed as in­ven­to­ries are draw­ing down, the stock mar­ket is ris­ing and de­mand around the world has been good," said Andy Lipow, pres­i­dent of Lipow Oil As­so­ci­ates LLC in Hous­ton "That has them com­ing back in on the long side."

Oil for Jan­uary de­liv­ery in­creased $1.19, or 1.4 per­cent, to set­tle at $89.19 a bar­rel on Dec. 3 on the New York Mer­can­tile Ex­change. It was the high­est level since Oct. 7, 2008.

Gold­man Sachs in­creased its 2012 fore­cast to $110 from $100, Deutsche Bank raised its 2011 pre­dic­tion to $87.50 a bar­rel from $80 and JPMor­gan boosted its 2011 num­bers to $93 from $89.75, say­ing that crude will reach $120 be­fore the end of 2012.

"Look­ing to­ward 2012, the stage is set for a re­turn to a struc­tural bull mar­ket in oil," Gold­man Sachs an­a­lysts led by New York-based David Greely said in a re­port to in­vestors on Dec. 1. The 2012 fore­cast is based on "the bet­ter prospects for con­tin­ued ro­bust world eco­nomic growth," they said.

Man­u­fac­tur­ing in the euro zone ex­panded at the quick­est pace in four months in Novem­ber, Markit Eco­nom­ics said Dec. 1. China's Pur­chas­ing Man­agers' In­dex grew at a faster rate for a fourth month, climb­ing to 55.2 from 54.7 in Oc­to­ber, the coun­try's lo­gis­tics fed­er­a­tion said the same day.

The Or­ga­ni­za­tion of Petroleum Ex­port­ing Coun­tries will likely keeps its pro­duc­tion tar­get un­changed at the Dec. 11 gath­er­ing min­is­ters from An­gola, Venezuela and Libya said Dec. 1 and Dec. 2. Oil at $80 to $85 a bar­rel is a "com­fort­able price," An­gola's Min­is­ter of Petroleum Jose Maria Botelho de Vas­con­ce­los said. OPEC, which pro­duces about 40 per­cent of the world's oil, hasn't al­tered its for­mal limit since De­cem­ber 2008, when it an­nounced record sup­ply cuts and a quota of 24.845 mil­lion bar­rels a day.

Net-long po­si­tions in crude oil rose by 24,461 fu­tures and op­tions com­bined, or 18 per­cent, to 164,204 the week ended Nov. 30, ac­cord­ing to the CFTC re­port.

The rise in long bets may not in­di­cate bullish sen­ti­ment for 2011, said Ge­orge Zivic, co-founder and chief in­vest­ment of­fi­cer of Almanac Cap­i­tal Man­age­ment LP.

"Al­though we are slowly mov­ing to tighter fun­da­men­tals, the de­gree of re­cent moves in the curve are not jus­ti­fied," Zivic said. "It makes me think that peo­ple are more likely cap­i­tal­iz­ing on the re­cent mo­men­tum of the mar­ket, and will likely do so through the bal­ance of the year." De­mand for petroleum prod­ucts fell for a third straight week in the week ended Nov. 26, the En­ergy Depart­ment said Dec. 1. Con­sump­tion dropped to 18.5 mil­lion bar­rels a day, the low­est level since Oct. 15.

In other mar­kets, net-long po­si­tions in fu­tures and op­tions com­bined in four nat­u­ral-gas con­tracts fell for the first time in five weeks, de­clin­ing by 10,437 fu­tures equiv­a­lents to 71,647 in the week ended Nov. 30, the CFTC re­port showed. -Bloomberg

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