Hedge Funds Boost Bullish Oil Bets and Gain From Late-Week Rally

(Bloomberg) -- Hedge funds couldn’t have timed an increase in bullish oil positions better, just before improving prospects for U.S. growth sent crude on its biggest two-day rally in six years.

Money managers boosted their net-long position in West Texas Intermediate crude 6.2 percent last week, days before futures surged 17 percent in the last two sessions, U.S. Commodity Futures Trading Commission data show.

Signs of a strengthening economy in the U.S., the world’s biggest crude consumer, helped drive the sudden rebound after concerns that demand will wane in China had pushed futures to six-year lows. America’s gross domestic product increased 3.7 percent in the second quarter, more than most analysts had expected, and consumer purchases climbed in July as incomes grew.

"There was some buying interest even as the market was making new lows," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. "It looks like low prices were seen as a buying opportunity."

The net-long positions in WTI advanced by 5,770 contracts to 99,176 futures and options in the week ended Aug. 25, according to the CFTC data. Longs rose 1.7 percent, while shorts decreased 1 percent, the third decline in four weeks.

Slight Lurch

WTI touched $37.75 on Aug. 24, the lowest level since February 2009, but the surge in the last two sessions left futures 12 percent higher for the week at $45.22 on Friday. Prices were down 2.2 percent at $44.25 a barrel at 8:22 a.m. on the New York Mercantile Exchange.

"There was bound to be some short-covering and bargain hunting on the agenda once prices fell to six-year lows," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. "It was time for a slight lurch towards testing the waters to the long side."