Hedge funds boosted their bullishness on crude oil by the most in six months as the U.S. economy grew and frigid weather bolstered demand for heating fuel.
Money managers increased net-long positions, or wagers on rising prices, for benchmark West Texas Intermediate crude by 13 percent in the week ended Jan. 28, the biggest gain since July, U.S. Commodity Futures Trading Commission data show.
Short positions fell 28 percent, the biggest decline since April 2012, as a report showing that U.S. gross domestic product grew 3.2 percent in the fourth quarter sent WTI to a one-month high. Prices also gained as consumption of distillate fuels, a category that includes heating oil and diesel, surged to the highest level in almost six years, draining supplies.
“Prices got really close to $100 because of improving economies in developed countries,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Cold weather is also increasing demand. These factors have caught the attention of speculators.”
Crude advanced $2.42, or 2.5 percent, to $97.41 a barrel on the New York Mercantile Exchange in the report week. Prices rose to $98.23 on Jan. 30, the highest settlement since Dec. 31. WTI dropped $1.06, or 1.1 percent, to $96.43 today.
Futures began the reporting period by advancing 1.8 percent to $96.74 on Jan. 22, the biggest gain since Dec. 3, on speculation that a government report the next day would show that U.S. distillate fuel supplies slid as falling temperatures increased consumption.
Oil also increased as TransCanada Corp. said the southern leg of the Keystone XL pipeline started deliveries to the Gulf Coast, home to 46 percent of U.S. refining capacity.
WTI advanced 0.6 percent to $97.32 on Jan. 23, the highest settlement in three weeks, after the Energy Information Administration said stockpiles of distillate fell 3.21 million barrels to 120.7 million in the week ended Jan. 17.
Crude declined 0.7 percent to $96.64 on Jan. 24, the first decrease in five days, as equities fell on concern that growth in emerging economies will slow, reducing fuel use. U.S. stocks dropped as the MSCI Emerging Markets Index slid 1.4 percent, extending its loss for the year to 5.2 percent.
Futures dropped 1 percent to $95.72 on Jan. 27, the biggest decline in two weeks, as purchases of new U.S. homes missed forecasts, raising concern that fuel consumption may slow. Home sales decreased 7 percent to a 414,000 annualized pace in December, the Commerce Department reported, lower than any estimate of economists surveyed by Bloomberg.
Oil surged 1.8 percent to $97.41 on Jan. 28, a four-week high, on U.S. consumer confidence and more bullish housing market figures. The Conference Board’s consumer confidence index climbed in January and the S&P/Case-Shiller index of property prices in 20 cities increased the most in almost eight years. WTI also rose on speculation that the Federal Reserve would trim its bond buying more slowly after durable-goods orders dropped in December.
Futures slipped 5 cents to $97.36 on Jan. 29 after a government report showed U.S. crude inventories rose more than expected in the week ended Jan. 24. The EIA, the statistical arm of the Energy Department, said supplies climbed 6.42 million barrels, the most in three months.
Prices rebounded from an intraday drop of 1.1 percent. Distillate demand surged 20 percent to 4.52 million barrels a day, the highest level since February 2008.
Commodity Weather Group LLC estimated that January will have a natural gas-weighted heating degree days value of 1,046, said Matt Rogers, the company’s president. It would be the coldest January since 1994, which had a value of 1,078.2.
WTI rose 0.9 percent to $98.23 on Jan. 30, the highest close this year, after data showed that consumer spending boosted the U.S. economy. The GDP gain in the last three months of 2013 matched the median forecast in a Bloomberg survey and followed a 4.1 percent advance the prior three months, Commerce Department data showed.
Net-long positions in WTI crude increased by 29,779 futures and options combined to 260,282, the highest level since the week ended Jan. 3. Long positions gained by 11,965 to 306,886, the highest level since September, while shorts tumbled by 17,814 to 46,604.
“More than half the buying last week was short covering,” said Tim Evans, an energy analyst at Citi Futures in New York. “It was more of a bet that the market had stopped moving lower rather than a sign of optimism prices will move much higher.”
Hedge funds raised net bullish bets on Brent crude by the most in more than a month. Net long positions climbed to 98,271 in futures and options combined in the week ended Jan. 28, up 7,956 contracts, or 8.8 percent, from the prior week, according to London-based ICE Futures Europe.
Money managers’ bullish wagers on ultra low sulfur diesel, a category that includes heating oil, surged by 14,200 futures and options combined to 20,825, the most since December.
The fuel increased 10.71 cents, or 3.6 percent, to $3.1218 a gallon in the report week. The contract climbed 6.24 cents, or 1.9 percent, to $3.2794 on Jan. 31, the highest settlement since March 16, 2012. It rose 1.04 cents to $3.0075 today.
Net-long bets on gasoline held by money managers, including hedge funds, commodity pools and commodity-trading advisers, dropped by 4,648 futures and options combined, or 15 percent, to 26,632, the lowest since July, the CFTC data showed.
Futures rose 0.72 cent, or 0.3 percent, in the reporting period to $2.6278 a gallon on the Nymex. Regular gasoline at the pump, averaged nationwide, slid 0.1 cent to $3.279 a gallon yesterday, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.The futures slipped 0.9 percent to $2.6069 today.
Net-long wagers on four U.S. natural gas contracts advanced 17,352 futures equivalents, or 4.3 percent, to 418,372, the most since May.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
Natural gas futures gained 60.2 cents, or 14 percent, to $5.033 per million British thermal units on the Nymex during the report week. Futures dropped 6.8 cents, or 1.4 percent, to $4.943 Jan. 31. The price fell 0.8 percent to $4.905 today.
“We might see WTI rise above $100 in the coming week,” Evans said. “Even with the high level of net longs, there’s room for further buying.”