Hedge funds' bullish oil bets hit April lows as dollar surges

[June 18, 2016]  By Barani Krishnan
 
 (Reuters) - Hedge funds and other big speculators cut their bullish bets on U.S. crude to the lowest in two months, trade data showed on Friday, as a resurgent dollar challenged oil bulls' attempts to keep the market above $50 a barrel.

Managed money's combined net longs in U.S. crude futures and options in New York and London fell by 46,053 contracts to 198,001 contracts during the week to June 14, data from the U.S. Commodity Futures Trading Commission (CFTC) showed.

It was the second straight week of declines in the net long position of U.S. crude held by such speculators. It was also the smallest bullish position for the group since April 10.

In terms of physical supply, the speculative net long position fell this week by around 46 million barrels, based on 1,000 barrels for each contract.

Before the last two weeks, managed money's net long holdings in U.S. crude rose three weeks in a row, growing by nearly 40,000 contracts, or 40 million barrels.

"This drop shows that at least some hedge funds think oil prices at current levels are suspect," said David Thompson, executive vice president at commodities-focused brokerage Powerhouse in Washington.

Oil has had difficulty staying at above $50 since it crossed that psychological barrier in late May.

U.S. crude prices fell in six of the past seven sessions after hitting an 11-month high of $51.67 on June 10.

The slide came as the dollar rallied on concerns that a potential Britain exit, or "Brexit", from the European Union would trigger global economic turmoil. A stronger dollar makes oil priced in the greenback costlier for holders of the euro and other currencies.

In Friday's session, however, U.S. crude's West Texas Intermediate (WTI) futures rose almost 4 percent, recouping virtually all of the previous day's loss to settle at $47.98 a barrel, as the dollar fell on reduced worries over Brexit.

Since hitting 13-year lows of under $30, WTI and futures of global oil benchmark Brent have risen about 80 percent, helped by supply disruptions in Nigeria, Canada, Libya and Venezuela.

Prior to that, worries about a global crude glut drove prices down from a mid-2014 high above $100.

The oil rally has also been challenged by worries that crude output could rise again with oil nearer to $50. Data showed on Friday showed the U.S. oil rig count rose for a third week in a row, indicating higher future production.

(Reporting By Barani Krishnan; Editing by Meredith Mazzilli)

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