With crude oil prices hovering near $30 per barrel, investors have jumped in to oil-related exchange traded funds, betting that the markets have been oversold.
Money managers have increased wagers on crude oil prices, reports Mark Shenk for Bloomberg.
According to the U.S. Commodity Futures Trading Commission, total bets on crude oil surged to the highest since it began tracking data in 2006. The combined short and long positions in West Texas Intermediate crude rose to 497,280 futures and options contracts int he week ended February 2.
WTI crude oil futures were down 3.1% to $29.9 per barrel Monday. [Oil ETFs Still Looking to Put in Bottoms]
“This is a reflection of a lot of conviction on both sides,” John Kilduff, a partner at Again Capital LLC, told Bloomberg. “We’re seeing a battle royal between those who think a bottom has been put in and those who think we have lower to go.”
In the ETF space, traders have been increasing bullish bets on a potential rebound in energy prices. For instance, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, has attracted $875.9 million in net inflows so far this year, according to ETF.com. The ProShares Ultra Bloomberg Crude Oil (NYSEArca: UCO), which takes two times or 200% daily performance of WTI crude oil, has attracted $183.1 million in inflows and the VelocityShares 3x Long Crude ETN (NYSEArca: UWTI), which tracks three times or 300% the daily performance of WTI crude, brought in $355.8 million. [Oil ETF Still Packing on the Assets]
Looking ahead, traders may be betting on a potential cut in supply from major oil-producing countries. Six members of the Organization of Petroleum Exporting countries and two non-members may be attending an extraordinary meeting to address potential changes.
“These efforts to come to an agreement between OPEC and non-OPEC have boosted optimism that an end to the rout is near,” Michael Lynch, president of Strategic Energy & Economic Research, told Bloomberg. “The likelihood of success is slight, but any sign of action is eagerly awaited.”
The oil markets have been suffering from a global supply glut over the past year. According to the Energy Information Administration, U.S. crude stockpiles rose 7.79 million barrels to 502.7 million in the week ended January 29, the highest since 1930.
Max Chen contributed to this article.