Hedge funds bet on rising oil prices

According to a report on today's oil prices on May 6, fund managers said that due to the expectation of a strong economic rebound and rising global crude oil demand, they are increasingly confident that oil prices will continue to rise sharply this year.

Last week, hedge funds increased their positions in crude oil futures, the most bullish position in two and a half months, and their net long positions in crude oil futures rose to their highest level in six weeks.

Increasing personnel mobility, economic reopening, and economic stimulus packages all herald strong economic growth and therefore strong oil demand growth.

Hedge funds will set their sights on India's economic recovery in the coming months.

Overall, commodity prices are at their highest level in 10 years.

Although rumors about oil entering the super cycle have subsided in recent weeks, major investment banks such as Goldman Sachs are still very optimistic about the overall trend of oil and commodities.

This summer, the reopening of economies and the increase in the number of tourists are bound to boost the demand for all major fuels in the world, including gasoline, diesel, and even aviation fuel.

Enterprise Products Partners director and co-CEO Jim Teague said on the first quarter earnings call earlier this week: “This is the first time in my life that traffic jams are wonderful.

　　Hedge fund managers also seem to be optimistic that demand will rebound strongly, and their bets in recent weeks indicate that despite setbacks in large developing economies such as India and Brazil, oil consumption will rise.

　　Inflation expectations may also attract more buyers to buy oil contracts, because investors will buy more commodities to hedge against inflation risks in their investment portfolios.

　　The Fed stated in the Federal Open Market Committee (FOMC) statement last week: “As inflation continues to fall below this long-term target, it will work to achieve a moderately higher than 2% inflation over a period of time, so that inflation can be maintained for a period of time.

　　All in all, although the recovery of oil demand in various economies is uneven, most economies, including the United States and Europe, are showing signs of a significant rebound this year.

　　Wang Jiajing excerpted and translated from today's oil prices

　　The original text is as follows:

　　Hedge Funds Bet On Higher Oil Prices

　　Money managers intimate a growing confidence that oil prices have room to run higher this year, thanks to expectations of a robust economic rebound and rising global demand for crude.

　　Last week, hedge funds added the most bullish positions in the oil complex in more than two and a half months, with the net long in crude oil futures jumping to the highest in six weeks.

　　Rising mobility, the reopening of the economies, and the stimulus packages all point to strong economic growth and consequently, strong oil demand growth.

　　Hedge funds are looking beyond the immediate COVID crisis in India toward economic recovery in the coming months.

　　Overall, commodities are at their highest in ten years.
The Bloomberg Commodity Spot Index tracking prices for 23 different commodities, including oil, hit on Tuesday the highest since 2011.
The index has rallied by over 70 percent since it hit a four-year low in March 2020.

　　Although talk of a supercycle in oil has subsided in recent weeks, major investment banks such as Goldman Sachs continue to be very bullish on oil and commodities as a whole, expecting strong economic growth and easy monetary policy to help oil demand to realize its biggest jump ever over the next six months.
Goldman sees oil prices hitting $80 a barrel this summer and expects the entire commodity complex to rally by another 13.
5 percent over the next six months.

　　Economies reopening and increased travel this summer are set to boost demand for all major fuels globally, including gasoline, diesel, and even jet fuel, which has shown the slowest recovery so far.

　　"For the first time in my life, I think traffic jams are beautiful," Jim Teague, Director and Co-Chief Executive Officer at Enterprise Products Partners, said on the Q1 earnings call earlier this week.

　　"While economic recoveries aren't uniform, when you look at the world's largest economies, demand has moved up, and all indications are that even Europe isn't far behind," he added.

　　Optimism that demand will rebound strongly seem to be shared by hedge fund managers, who have shown with their bullish bets in recent weeks that oil consumption will rise despite the setbacks in large developing economies such as India and Brazil.

　　Inflationary expectations are also likely to attract more buyers into oil contracts as investors are set to buy more commodities to hedge against inflation risks in their portfolios.

　　"With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer? term inflation expectations remain well anchored at 2 percent," the Fed said in its Federal Open Market Committee (FOMC) statement last week.

　　Oil demand recovery is uneven across economies, but most of those, including the United States, and now Europe, are showing signs that they are on track for a major rebound this year, rekindling confidence among money managers that oil prices still have room to rise beyond $70 a barrel.