Oil investors raise bets on higher price

Money managers boosted wagers on higher West Texas Intermediate crude for third week as of April 18

The shale boom is making it hard to be an oil optimist. While hedge funds raised their bets on rising prices, the market tanked. Money managers boosted wagers on higher West Texas Intermediate crude for a third week as of April 18, US. Commodity Futures Trading Commission data show. The next day, futures tumbled after a report showed US output rose for a ninth straight week. Prices continued to fall even after Saudi Arabia said exporters have reached an initial deal to extend production curbs past June.

“Based on what happened the rest of the week, this will be the last hurrah,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “There was a narrative that the Opec, non-Opec cuts would be effective and balance the market. The narrative unravelled by the end of the week.”

Oil futures touched an 18-month high on the first day of trading this year as an accord between the Opec and 11 other producers to cut output for six months came into effect. The rise in prices had the unintended effect of spurring drilling in US shale basins.

Long position

Money managers’ WTI netlong position, or the difference between bets on a price increase and wagers on a drop, climbed 4.6 per cent in the week ended April 18, according to the CFTC. WTI slipped 1.9 per cent to $52.41 a barrel in the report week, and was 0.5 per cent higher at $49.86 at 12:12pm Singapore time yesterday.

“It looks like those new bullish positions added over three weeks are what are known as weak longs,” Mike Wittner, head of commodities research at Societe Generale in New York, said by telephone.