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Oil ETFs Strengthen as Hedge Funds Get Bullish on WTI


Oil exchange traded funds are strengthening as the U.S. economic engine gains momentum, with hedge funds raising bullish bets on crude oil to a three-month high.

The United States Oil Fund (USO) has gained 6.2% over the past month and was up 6.5% over 2013. [ETF Chart of the Day: Oil Plays]

Money managers raised net-long positions, or bullish bets, for West Texas Intermediate crude by 4.4% in the week ended Dec. 24, the fourth consecutive increase and longest streak since July, reports Mark Shenk for Bloomberg.

“There’s a strong demand environment here and that’s attracted the interest of the hedge funds,” John Kilduff, a partner at Again Capital LLC, a hedge fund that focuses on energy, said in the article. “We’ve got a bullish surge going into the end of the year.”

Crude oil has strengthened after the Fed pointed to improved economic growth as a reason for its $10 billion tapering and recent government reports indicating faster-than-expected domestic growth. U.S. GDP expanded an annualized 4.1% in the third quarter, compared to average consensus calls for a 3.6% projected growth.

“There’s been increasing interest from money managers and that flow has been supportive for the market,” Tim Evans, an energy analyst at Citi Futures, said in the article.

USO  tracks the price performance on front-month WTI futures contracts. Consequently, if longer-dated contracts cost more than near-term contracts, investors face potentially lower returns as the ETF rolls futures contracts.

United States Oil Fund

For more information on oil, visit our oil category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.