Hedge Funds Increase Bets on Oil Gains by Most Since 2007

Hedge funds and other large speculators raised bets that oil would gain by the most in more than three years just as it began to slide, the second straight week money managers lined up on the wrong side of the market.

So-called net long positions on the New York Mercantile Exchange rose 67 percent the week ended July 13, the most since February 2007, according to the weekly Commitments of Traders report from the Commodity Futures Trading Commission. Oil fell on four out of five days on the Nymex last week, ending down 0.1 percent at $76.01 a barrel as of July 16. It rose 5.4 percent the previous five days, the biggest weekly gain since May.

“Just like last week, when they were short when prices were up, now they were long when prices were down,” said Hamza Khan, an analyst with Schork Group Inc., a consulting company in Villanova, Pennsylvania.

Oil slipped last week amid evidence that the U.S. economic recovery is slowing, reducing fuel demand in the world’s biggest energy-consuming country. Hedge funds suffered their worst second quarter in a decade this year, losing 2.79 percent, according to Hedge Fund Research’s HFRX Global Hedge Fund Index.

Crude oil for August delivery rose 95 cents, or 1.3 percent, to $76.96 at 10:17 a.m. today on the Nymex.

Net-long positions among hedge funds and other large speculators in crude oil futures and options combined on the Nymex rose to 84,455 for the seven days ended July 13, according to the CFTC data.

Slowing Economy

The Thomson Reuters/University of Michigan consumer sentiment index for July fell to 66.5 from 76 in June. The Federal Reserve Bank of New York reported July 15 that its general economic index dropped to 5.1 in July from 19.6 the prior month. The Federal Reserve Bank of Philadelphia’s general economic index declined to 5.1 this month, the lowest level since August 2009, from 8 in June.

Bloomberg