Bears get out of the way as crude’s re­bound takes hold

Gulf Times Business - - BUSINESS -

Crude oil’s rally is start­ing to sweep away the pes­simists. After start­ing 2019 on a cau­tious tone, hedge funds last week slashed bets on fall­ing Brent crude prices to the low­est level since mid-Novem­ber, as they looked to get out the way of a re­cov­ery that pushed oil back into a bull mar­ket. Wa­gers on in­creas­ing prices climbed the most in a month, re­vers­ing course from last week.

The global bench­mark surged last week, as the US and China made progress in trade talks and Opec mem­bers reaf­firmed its com­mit­ment to head off a sup­ply glut. Money man­agers have turned al­ter­nately bullish and bear­ish on the rally in re­cent weeks, but the ev­i­dence for a sus­tained move higher is get­ting harder to ig­nore, said Mark Wag­goner, pres­i­dent of Ore­gon bro­ker­age Ex­cel Fu­tures Inc.

“Just hav­ing an­other pos­i­tive week is go­ing to be huge for a lot of peo­ple’s psy­ches, after we got so beat up last year,” Wag­goner said by tele­phone. “I think you’re go­ing to see more of them com­ing on board this week.”

Brent has gained more than 20% since hit­ting an 18-month low in late De­cem­ber. None­the­less, it’s still down by al­most a third since Oc­to­ber and faces con­tin­u­ing pres­sure from the boom in US shale drilling and an un­cer­tain econ­omy. Prices fell for the first time in two weeks on Fri­day, re­treat­ing 2% to $60.48 a bar­rel.

US crude prices fin­ished the week up 7.6%, their best show­ing in six months. Data on hedge fund wa­gers for West Texas In­ter­me­di­ate crude weren’t avail­able due to the US gov­ern­ment shut­down.

Brent net-long po­si­tions – the dif­fer­ence be­tween bullish and bear­ish wa­gers – climbed 3.8% to 158,146 op­tions and fu­tures con­tracts in the week end­ing Jan­uary 8, the ICE Fu­tures Europe ex­change said on Fri­day.

Most of the shift came from a 3.6% de­cline on con­tracts pre­dict­ing a Brent drop. Bets on ris­ing prices edged up 0.8%. They’ve traded gains and losses for the past six weeks.

Late De­cem­ber’s more bear- ish stance “was more about hedge funds squar­ing their books after they’d had a very bad year,” said Frances Hud­son, a global the­matic strate­gist at Aberdeen Stan­dard In­vest­ments in Ed­in­burgh. Sen­ti­ment has im­proved markedly, she said in a tele­phone in­ter­view. “Things seemed to have set­tled down a lit­tle bit in terms of pro­duc­tion,” Hud­son said.

An oil tanker is seen at sun­set an­chored off the Fos-Lav­era oil hub near Mar­seille, France (file). Brent has gained more than 20% since hit­ting an 18-month low in late De­cem­ber. None­the­less, it’s still down by al­most a third since Oc­to­ber and faces con­tin­u­ing pres­sure from the boom in US shale drilling and an un­cer­tain econ­omy.

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