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Investors Back Oil’s Jump Above $60 With Surge in Bullish Bets

Carlos Caminada and Sheela Tobben
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Investors Back Oil’s Jump Above $60 With Surge in Bullish Bets

(Bloomberg) -- Hedge funds boosted bets on rising U.S. crude prices to the highest level in more than seven months, helping support oil’s first full week above $60 a barrel since May.

Their net-bullish wagers on West Texas Intermediate crude climbed 19% in the week ended Dec. 17, data released Friday show. Optimism over a U.S.-China trade truce and OPEC cuts helped push futures to a three-month high, though the rally has fizzled somewhat.

“I expect to see more length in the market as a function of what looks to be the successful negotiation of Phase 1 of the U.S.-China trade pact, as well as the OPEC meeting with their pledge to reduce output,” said Andrew Lebow, senior partner at Commodity Research Group in New York.

The improved outlook for trade and OPEC’s pledge to deepen output cuts are helping U.S. oil head for a rebound of more than 30% this year, its best performance since 2016. That’s after a 25% slump in 2018.

It also seems that America’s shale boom is slowing down and several forecasts for the country’s crude output next year have been lowered.

“U.S. production estimates continue to fall,” said Rebecca Babin, senior equity trader at CIBC Private Wealth Management. “A likely return of the downside from last year was mitigated by Phase 1 of the China-U.S deal, and OPEC staying on price stability theme instead of market share.”

Money managers’ WTI net-long position, or the difference between bullish and bearish bets, climbed to 272,218 futures and options, the highest level since April, according to U.S. Commodity Futures Trading Commission data. Long-only wagers jumped 13%, while shorts declined 24%.

To contact the reporters on this story: Carlos Caminada in Calgary at ccaminada1@bloomberg.net;Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Pratish Narayanan, Carlos Caminada

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