Oil bulls hold their ground ahead of make-or-break OPEC summit

OPEC can make or break oil’s bull run, and hedge funds are betting the cartel will keep fueling the rally.

Money managers increased wagers on rising West Texas Intermediate and Brent crude prices to the highest since October ahead of a key meeting of top exporters in Azerbaijan over the weekend.

“As long as we come out of the weekend with stasis, the hedge funds will consider that a positive sign and will continue to support the bull run,” said Ashley Petersen, an oil analyst at Stratas Advisors in New York.

As the producer group prepares for the gathering with allies including Russia, OPEC has signalled commitment to its deal to cut output. That’s helped spur a rally of more than 30 percent for both benchmarks since late December. Plus, sanctions on Iran and Venezuela have helped to tighten global oil supply.

WTI ended the week more than 4 percent higher, at $58.52 a barrel, just pennies below a four-month high. Brent had a weekly gain of 2 per cent, to $67.16.

The weekend’s agenda in Baku, Azerbaijan’s capital, includes a meeting of Russia’s Energy Minister Alexander Novak with his Saudi Arabian counterpart, Khalid Al-Falih. Their two countries, which together produce more than a fifth of the world’s crude, are key to the accord’s success.

Saudi Arabia is said to have pledged a bigger-than-required cut in crude shipments to its customers in April, and the kingdom is leaning toward extending the output curbs agreement into the second half of this year. Russia, in turn, has said it will speed up its progressive reduction of production.

“The speculative community is starting to get bullish,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, Missouri. “The Saudis appear pretty committed to trying to keep supplies constrained and generally, if the Saudis are willing to put that out there, the rest of the cartel usually goes along.”

Hedge funds’ WTI net-long position — the difference between bets on higher prices and wagers on a drop — climbed 4 percent to 157,648 futures and options in the week ended March 12, according to the U.S. Commodity Futures Trading Commission. Longs rose for a third straight week, while shorts dropped 7 per cent during the period.

At the beginning of the year, there were fears that US production growth “was going to explode, demand is going to crumble, and what are we going to do with an excess of oil?,” Petersen said. “Now, we’re actually getting data that shows the sky isn’t falling and positions are reacting accordingly.”

OPEC has signalled commitment to its deal to cut output