Bets on Brent Crude Rally are Rising

Hedge funds increased their bets on rising Brent crude oil prices last week to their highest since July 2014, exchange data showed on Monday, in a sign large speculators are positioning for a possible rebound.

Money managers increased their net long positions in Brent futures and options by 7,585 contracts to 193,196 in the week to March 24, InterContinentalExchange (ICE) data showed, taking the difference between bets on rising and falling prices to the highest since July 14.

Brent prices have roughly halved since last summer, and large speculators in the oil market have now accumulated the paper equivalent of almost 200 million barrels of the international benchmark, the ICE data showed.

Money manager net longs in Brent hit an all-time peak of 242,201 in the week to June 24 last year - just before oil prices started their precipitous decline from above $110 a barrel to near $45 in January.

Brent has since recovered to near $56 a barrel, boosted by stronger demand and concerns over tensions in the Middle East. A possible nuclear deal between Western powers and Iran has stoked fears amongst traders, however, that more oil could be released on to a well-supplied market.

Part of the fund positioning in Brent is probably due to spread plays between the North Sea contract and its U.S. rival, West Texas Intermediate (WTI), traders said.

Short positions in WTI have risen to a record high as traders bet record crude stocks in the United States will keep the U.S. benchmark under pressure relative to Brent.

The Brent-WTI spread <LC-CL1=R> was around $7.60 on Monday.

By David Sheppard