Hedge funds have amassed the biggest ever bet on rising oil prices

Hedge funds have amassed the biggest ever bet on rising oil prices as investors back Opec’s bid to tighten the crude market and seek protection against fears of inflation.
Data from regulators and exchanges showed speculators have built long positions equivalent to almost 1bn barrels of crude across the major contracts, while short positions amount to just 111m barrels.

That massive paper position is equal to just over nine days of global oil demand, and has prompted some traders to express concern prices could fall if funds move to take profits by selling positions en masse. But the record oil bet, which investors have increased while prices have held relatively steady since the start of the year, could also point to the involvement of large macro funds. These sometimes trade oil as a hedge against moves in other sectors.

Markets are also focused on the impact of policies under Donald Trump as Opec producers and allies such as Russia have cut oil output as part of a deal to curb supplies and raise prices. Richard Robinson, manager of the Global Energy Fund at Ashburton Investments, said: “Energy is probably the only commodity which gives you a real hedge against unexpected inflation.” Oil futures are attractive to European investors concerned about inflation because they are widely traded and provide portfolios with exposure to both the potential for higher commodity prices and a stronger dollar.

The whole curve is no longer in contango, when prices for future delivery are higher than spot prices — a sign of over supply — but contracts for later delivery have flipped into the opposite state of backwardation.
That can make betting on higher crude prices more attractive for investors

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