Hedge funds increased bullish bets on crude oil to the highest in three months as stockpiles dropped and the U.S. economy expanded more than forecast.
Money managers raised net-long positions, or wagers on rising prices for West Texas Intermediate crude, by 4.4 percent in the week ended Dec. 24, U.S. Commodity Futures Trading Commission data show. It was the fourth consecutive increase, the longest streak since July.
WTI topped $100 a barrel for the first time in two months on Dec. 27, propelled by falling inventories in the U.S., the world’s biggest oil-consuming country. The Federal Reserve cited prospects for improved growth for a reduction in its bond-buying program, and a government report showing that the domestic economy accelerated in the third quarter at a faster rate than previously estimated bolstered expectations for strengthening fuel demand.
“There’s a strong demand environment here and that’s attracted the interest of the hedge funds,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’ve got a bullish surge going into the end of the year.”
Federal Reserve
“There’s been increasing interest from money managers and that flow has been supportive for the market,” said Tim Evans, an energy analyst at Citi Futures in New York.
Futures began the reporting period by rising 0.6 percent to $97.80 on Dec. 18 after the Fed announced it will begin curbing the pace of stimulus and boosted its assessment of the job market. The central bank will cut monthly bond purchases to $75 billion from $85 billion. The central bank said the unemployment rate will fall as low as 6.3 percent by the end of 2014, down from a September forecast of 6.4 percent to 6.8 percent.
WTI also gained after the Energy Information Administration said U.S. crude inventories fell 2.94 million barrels in the week ended Dec. 13, the third straight decline. Supplies at Cushing, Oklahoma, the delivery point for New York futures, slipped 600,000 barrels, according to the EIA, the Energy Department’s statistical arm. Fuel demand surged 13 percent to 21 million barrels a day, the highest since April 2008.
Crude gained 97 cents to $98.77 on Dec. 19 as the market rallied a second day on the Fed announcement and falling stockpiles.
Economic Outlook
WTI climbed 28 cents to a two-month high of $99.32 on Dec. 20 after a Commerce Department report showed that the U.S. economy expanded in the third quarter at a faster rate than previously estimated. Gross domestic product increased at a 4.1 percent annualized rate, up from a previous estimate of 3.6 percent. A 3.6 percent gain in GDP was projected, based on the median forecast of 72 economists surveyed by Bloomberg.
Durable Goods
Crude advanced 0.3 percent to $99.22 a barrel on Dec. 24, the fourth gain in five days, as U.S. orders for durable goods climbed more than forecast. Bookings (DGNOCHNG) for goods meant to last at least three years rose 3.5 percent in November, the Commerce Department reported today. Orders grew after a 0.7 percent drop the prior month, the department said. The median estimate of 75 economists surveyed by Bloomberg called for a 2 percent advance.
The Nymex was closed for Christmas on Dec. 25. Prices gained 0.3 percent on Dec. 26 after a Labor Department report showed that fewer Americans than projected filed for unemployment benefits.
