Crude Oil Market Rallies on Fading Fears of a Glut
(Bloomberg) -- The oil market has all but forgotten last year’s price crash.
Money managers haven’t been this optimistic about U.S. oil prices since early October, just before the crude market began a steep decline on fears of a global oversupply. Crude made a steady comeback this year and sentiment has climbed alongside it, with the net-long position rising for the sixth straight week in data posted on Friday.
West Texas Intermediate crude prices rallied almost 5 percent this week as OPEC stuck to output cuts and blackouts continued to sap Venezuelan production. While the economic outlook remains uncertain, there have been enough positive signs -- including encouraging U.S. jobs data -- to allay the worst fears about demand, said Nick Holmes, an analyst at Leawood, Kansas-based Tortoise.
“China has put on stimulus, the Fed is pretty much all-in dovish on interest rates and it seems like we could be near an end to the trade war,”’ said Holmes, whose firm manages $16 billion in energy investments. “A lot of the risks that people saw have abated here in 2019 and that’s driving the market higher.”
The net-long WTI position -- the difference between bets on higher prices and wagers on a decline -- climbed 2.8 percent to 244,807 futures and options contracts for the week ended April 2, according to the U.S. Commodity Futures Trading Commission. Long positions edged up by almost 1 percent, while shorts plunged by 10 percent.
“There’s room for sentiment to expand without being completely stretched out -- but you’re at the higher end of the range,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle, which oversees $164 billion. “I think there’s a question about how far this sentiment can go.”
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