After being burned by crude’s slump in the first half of 2023, hedge funds are rushing back into the oil market with their most bullish wagers in more than a year.
Money managers entered the year betting that restricted Russian output and resurgent Chinese demand would propel crude back toward the heights it had reached in 2022. Those hopes were quickly dashed as recession fears, US banking turmoil and resilient Russian flows pushed prices lower. Among the hardest hit was oil trader Pierre Andurand, whose main fund had its worst-ever run in the first half.
Andurand’s fund notched one of its best months ever in July, and other hedge funds have returned to the market, helping boost participation. “The biggest gap in our projected balances this year has been Russia,” Francisco Blanch, head of commodities research at Bank of America Corp., said in July. “We came into the year thinking we were going to lose a lot of Russian supply. What we saw was an enormous amount of Russian oil, both crude and petroleum products coming into the market.”
“The bulls got global recovery wrong,” Ed Morse, global head of commodity research at Citigroup Inc., said in July. “And they were overly optimistic on Chinese demand in particular.” “Much of the market’s growth pessimism has been abandoned,” Goldman Sachs Group Inc. analyst Daan Struyven said in a phone interview in July. “And consistent with a reduction in pessimism, positioning has risen pretty significantly.”
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