Hedge funds have started to accumulate bullish positions in crude oil and diesel once more, amid rising optimism about the outlook for the global economy in 2019. Hedge funds and other money managers increased their net long position in Brent crude futures and options by 15mn barrels to 173mn barrels in the week to January 15. Portfolio managers have raised their net long position in Brent in five of the last six weeks, by a combined 36mn barrels since December 4, according to exchange data.
Funds also boosted their net long position in European gasoil by 6mn barrels to 11mn barrels, the second small weekly increase in a row, after twelve large consecutive declines. In both cases, most of the new buying came from the closure of existing short positions rather than opening fresh long ones. It follows the largest sell-off ever recorded in crude and gasoil during the fourth quarter and suggests many fund managers sense prices have found a floor, at least temporarily. The new wave of buying in crude and gasoil is still small and net positions are still a fraction of the 500mn barrels of Brent and 126mn barrels of gasoil held in September.
But it comes amid increasing optimism among investors about a future trade deal between the United States and China that could help avert a feared recession. The same optimism that has boosted the US S&P 500 share index by 14% since December 26 and South Korea’s trade-exposed KOSPI-100 index by 8% since January 4 is helping reverse some of the recent losses in oil prices.
Sources and photo-credits: Reuters, Gulf Times