Better prospects for crude oil is nowhere more evident than on derivatives markets and the shift in positioning of large-scale derivatives speculators such as hedge funds.
Hedge funds have pushed long positions – bets on higher prices in future – to all-time record levels across five energy markets including US benchmark West Texas Intermediate crude, Brent international oil futures, and US gasoline and diesel fuel.
According to the CFTC’s weekly Commitment of Traders data up to January 23 so-called managed money investors on Nymex in New York and ICE Futures in Europe now hold the equivalent of more than 1 billion barrels of oil on a net basis. That compares to lows of just over 200m barrels in 2014 and similar dips in 2015 and the start of 2016.
WTI and Brent have added roughly $25 a barrel from lows struck in June last year with Brent, which usually trades at a premium to the US benchmark, recently topping $70 a barrel for the first time in more than three years.
Ole Hansen, chief commodity strategist at Saxo Bank, says that so far calls for a crude oil correction have been left unheard “despite the increased risk of such a one-sided position”:
The fact however remains that funds will continue to buy into strength until the music stops. This past week gave the bulls no cause for concern as the dollar weakened, worldwide growth was cheered in Davos and US crude stocks continued to decline.
Source: Mining.com
