The US CFTC estimated that hedge funds’ net long positions in US crude oil (UWT) (DWT) futures and options fell by 15,591 contracts to 396,381 contracts between December 26, 2017, and January 2, 2018. The net long positions fell 4% week-over-week but rose 31% or by 91,913 contracts year-over-year.
Hedge funds’ net long positions on US crude oil (SCO) (USO) futures and options were near the highest level since February 21, 2017. It suggests that hedge funds are bullish on crude oil (UCO) (USL) prices.
Crude oil price forecasts
The EIA released its monthly STEO (Short-Term Energy Outlook) report on January 9, 2018. The EIA forecast that Brent (BNO) crude oil would average $59.74 per barrel in 2018—4.3% higher than the previous estimates in December 2017. It also expects WTI crude oil (UCO) prices would average $55.33 per barrel in 2018—4.8% higher than the previous estimates.
The extension of ongoing production cuts, strong crude oil demand, rising geopolitical tension in the Middle East, and supply outages will support oil prices in 2018. However, the rise in US and non-OPEC crude oil production in 2018 will limit the upside for oil prices. The EIA expects global oil inventories to build in 2018, which would also limit the upside for oil prices. Brent and WTI crude oil prices averaged $54.15 per barrel and $50.79 per barrel in 2017.
A Wall Street Journal survey of 15 investment banks estimated that Brent and WTI crude oil prices would average $58 per barrel and $54 per barrel in 2018. Higher oil prices benefit energy producers (XLE) like Northern Oil & Gas (NOG), Chevron (CVX), and Contango Oil & Gas (MCF).
Read What’s the Next Important Resistance Level for Crude Oil Futures? and US Natural Gas Futures Could Rise in 2018 for updates on oil and gas.