Hedge Funds’ Net Long Positions in WTI Reached a New High

Gordon Kristopher - Author

Nov. 20 2020, Updated 2:05 p.m. ET

Hedge funds  

On February 24, 2017, the CFTC (U.S. Commodity Futures Trading Commission) released its weekly Commitments of Traders report. It showed that hedge funds increased their net long positions in US WTI (West Texas Intermediate) crude oil futures and options contracts to a new all-time high.

Hedge funds’ net long positions rose by 23,299 contracts to 413,637 contracts in the week ending on February 21, 2017—compared to the previous week. Crude oil (XLE) (XOP) (BNO) prices rose 0.2%—compared to the previous week.

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Record bullish positions by hedge funds on WTI crude oil suggest that OPEC’s crude oil production cut deal could extend in 2H17 to support oil prices. It could be the most important positive driver for crude oil in 2017. Hedge funds also think that oil prices above $50 per barrel could have a positive impact on oil drillers and oil producers’ revenue.

Bearish drivers 

Market surveys expect US crude oil production to increase in 2017—compared to 2016. Also, the implementation of President Trump’s energy policies could increase US production and pressure crude oil (ERX) (USL) prices in 2017.

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Bullish drivers 

Bernstein Energy reported that global oil inventories fell by 24 MMbbls (million barrels) to 5.7 billion barrels in 4Q16—compared to the previous quarter. Falling global inventories support crude oil prices. Higher crude oil prices have a positive impact on oil and gas producers’ earnings such as Marathon Oil (MRO), Matador Resources (MTDR), Sanchez Energy (SN), Continental Resources (CLR), and Goodrich Petroleum (GDP).

Crude oil price forecast 

A recent Reuters survey estimates that Brent crude prices will average $57.52 per barrel in 2017. Surveys also suggest that Brent prices won’t exceed $60 per barrel even if OPEC extended its output cuts to 2H17.

The International Energy Agency thinks that oil prices might not exceed $65 per barrel in 2017 despite major oil producers’ production cuts. Tortoise Capital Advisors thinks that US WTI and Brent crude oil prices could trade between $50 and $60 per barrel in 2017.

The EIA estimates that US WTI and Brent crude oil prices will average $52.5 per barrel and $53.5 per barrel, respectively, in 2017. It also estimates that US WTI and Brent crude oil prices will average $55.2 per barrel and $56.2 per barrel, respectively, in 2018. US WTI and Brent crude oil prices averaged $43.3 per barrel and $43.7 per barrel, respectively, in 2016.

Read Will Crude Oil Prices Test 3 Digits Again? for more information on crude oil price forecasts.

For more on crude oil prices, read What Can Investors Expect in the Crude Oil Market in 2017 and OPEC, Russia, and the US Will Impact Crude Oil in 2017.

For energy-related analysis, visit Market Realist’s Energy and Power page.


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