Money managers are making the most bullish bets in more than a year, with many betting that oil prices will soon top $100 a barrel after a strong rally triggered by production and export cuts by Saudi Arabia and Russia.
The latest Commodity Futures Trading Commission (CFTC) Commitments of Traders (COT) report showed that hedge funds’ combined net long positions in Brent and West Texas Intermediate rose by 137,000 contracts, or 35 percent, to an 18-month high of 527,000 contracts in the two weeks to September 12. The numbers, good for ~5 days of global demand, are a widely watched proxy for hedge fund sentiment.
“A significant amount of dry powder had been sitting on the sidelines, meaning the recent strong tape could trigger further chasing and catching up in positioning. This oil market has become as much a momentum-based market as a fundamentally-based market,” Michael Tran, global energy strategist at RBC Capital Markets, told Bloomberg.
In another notable trend, oil producers are selling contracts for later delivery to lock in higher prices for future production. In a sign of growing confidence that high oil prices are here to stay, the spread between December 2023 and December 2024 contracts has widened to $10 per barrel as backwardation deepens.