A brief tryst with bullish oil positions among professional investors appears to have been just that: Brief.
Some investment banks, though, are growing more bullish on the oil outlook for the rest of the year. For example, JP Morgan (NYSE: JPM) projects Brent crude oil to rise to $65 per barrel in the third quarter and $67 per barrel in the fourth, reports Arjun Kharpal for CNBC. Barclays analysts anticipate Brent to reach $61 per barrel in the third quarter and $66 per barrel in the fourth. Nevertheless, the bank warned of ongoing issues that may still cause short-term volatility, which contributed to their slightly lower forecast.
Looking ahead, oil observers expect the supply and demand dynamic to become more balanced in 2016. The Organization of Petroleum Exporting Countries also projected rising demand for oil this year and the next, which could “imply an improvement toward a more balanced market.” [Oil ETFs Look to Rally]
Even with some longer term optimism for oil, hedge funds and other professional speculators once again pared bullish oil bets last week.
“Money managers’ net-long position in West Texas Intermediate crude declined 11 percent in the week ended Aug. 11, U.S. Commodity Futures Trading Commission data show. Short positions climbed to the highest level since March, a signal speculators see prices continuing to fall. Funds curbed bullish bets on Brent in London to the lowest level since December, data from ICE Futures Europe showed,” reports Mark Shenk for Bloomberg.
For the week ended Aug. 14, the United States Oil Fund (NYSEArca: USO) added $194.3 million in new assets, a total surpassed by just six other ETFs. Investors have added nearly $1.9 billion to USO this year even as the fund has tumbled nearly 31%.
Traders can profit from more oil declines with ETFs such as the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) and the VelocityShares 3x Inverse Crude (NYSEArca: DWTI). SCO tries to reflect the two times inverse or -200% daily performance of WTI crude oil while DWTI takes the three times inverse or -300% performance of crude oil. [Inverse ETFs to Hedge Against Hurdles Ahead]
While those ETFs have surged in recent weeks, traders have been reluctant to add new money to thise funds.
United States Oil Fund
