(MENAFN- Gulf Times) Speculators increased bullish bets on US oil for the first time in seven weeks, a move that came too early in a market that continues to slide.
Money managers' net-long position in West Texas Intermediate crude climbed 13% in the week ended August 4, US Commodity Futures Trading Commission data show. That's a rebound from last week's figure, which was the lowest level since 2010. Funds curbed bullish bets on Brent, the international benchmark, to the lowest since February, according to data from ICE Futures Europe.
Major oil companies are preparing for a longer downturn and banks including Societe Generale are reducing their price forecasts as crude approaches a six-year low. The plunge has gathered strength as US producers return drilling rigs to service and Iran seeks to increase exports after last month's nuclear agreement with world powers."There's a lot of money on the sidelines and when it looks like a bottom is in, there's a temptation to get back in," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone Aug. 7. "This is despite the overwhelming evidence that we're oversupplied. Prices can still move a lot lower."
West Texas Intermediate crude dropped $2.24, or 4.7%, to $45.74 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Futures advanced 18 cents to $44.05 at 12:41pm London time after closing August 7 at the lowest level since March.
Societe Generale reduced its WTI forecasts for the third quarter by a fifth and cut its outlook for 2016 by $5 a barrel. That follows reductions in the past month by Bank of America Corp and Citigroup.
A persistent global surplus has made the biggest oil companies more pessimistic about a swift price recovery. Chevron Corp lowered its long-term outlook for crude July 31, joining Royal Dutch Shell Plc and BP Plc in gearing up for an extended period of lower prices. Producers in the US increased the number of active oil rigs for the fifth time in six weeks, Baker Hughes data showed. The return of rigs may bolster production at a time when US crude inventories are almost 100mn barrels above the five-year average.
Bullish bets are down by more than half since May, just before a price recovery to above $60 a barrel stalled.
"This looks a lot like earlier in the year when there was a lot excitement to call a bottom and people learned a hard lesson," Kilduff said. The net-long position in WTI increased by 13,287 contracts to 112,220 futures and options, the biggest gain since April. Longs advanced 4.1% while shorts slipped for the first time in seven weeks.
Bullish bets on Brent decreased by 28,718 contracts to 147,184, a third week of decline to the lowest level since February 3, ICE data show.
In other markets, net bullish bets on Nymex gasoline advanced 7.6% to 14,633. Futures fell 6.5% to $1.6852 a gallon. Net bearish wagers on US ultra-low sulfur diesel increased 36% to 27,365 contracts, the most in four months. The fuel slipped 3.5% to $1.5475 a gallon.
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