Oil Bears Routed by Spring Thaw in Prices as Drill Rigs Sit Idle

by Dan MurtaughLynn Doan
7:01 PM EDT
April 26, 2015

Speculators pulled bearish oil bets at the fastest pace on record as Saudi Arabia renewed strikes on Yemen and U.S. output slowed.

Hedge funds reduced their short position in West Texas Intermediate crude by 32 percent in the seven days ended April 21, driving the net-long position to the highest since July, U.S. Commodity Futures Trading Commission data show. Bullish bets on Brent increased to the highest in at least four years.

A record drop in rigs drilling for crude reduced production even as demand rose, boosting speculation that WTI has found a floor after the biggest rout since 2008. A 32 percent rally since March was also stoked by concern that the conflict in Yemen may disrupt traffic through the world’s fourth-busiest channel for shipping oil.

“The falling rig count and the reduction we’re starting to see in output shows that the bottom has in fact been installed,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone April 24. “A lot of people are throwing in the towel.”

WTI futures rose $1.97 to $55.26 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. They gained 21 cents to $57.36 at 10:43 a.m. Monday, after capping a sixth weekly gain on April 24.

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http://www.bloomberg.com/news/articles/2015-04-26/oil-bears-routed-by-spring-thaw-in-prices-as-drill-rigs-sit-idle