On Tight Supply Signals, Hedge Funds Bet on Bullish Oil Prices

Hedge funds ramped up bullish bets on crude oil last week at the fastest pace since June, driven by tightening U.S. supply conditions and rising geopolitical risks. But the optimism proved short-lived, with futures tumbling after reports that OPEC+ may consider another major production increase.

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According to data from ICE Futures Europe and the U.S. Commodity Futures Trading Commission compiled by Bloomberg, money managers expanded their combined net-long positions in West Texas Intermediate (WTI) and Brent crude by 54,183 contracts, bringing the total to 245,650 lots in the week through Tuesday. It marked the biggest jump since mid-June and pulled net-long positions in WTI off their lowest level in 18 years.

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The renewed bullish stance, however, came just before oil prices began to retreat midweek on speculation that OPEC and its allies could accelerate the timeline for restoring more supply.

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Markets are now bracing for the group’s upcoming video conference on Sunday, where a potential output boost will be a key focus. Some traders are even positioning for Brent to fall below $60 a barrel if the alliance agrees on a substantial hike.

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Prior to the OPEC+ headlines, crude prices had found support from the continued stalemate in Ukraine. U.S. diplomatic efforts to pressure Moscow into peace have shown little progress, keeping Russian barrels from reentering global markets in meaningful volumes.

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Adding to the skepticism, German Chancellor Friedrich Merz said that a direct meeting between Ukrainian President Volodymyr Zelenskiy and Russian leader Vladimir Putin viewed as an essential step toward ceasefire talks is currently off the table.

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Supply fundamentals in the U.S. also provided tailwinds for crude earlier in the week. Government data showed inventories at Cushing, Oklahoma the nation’s key storage hub declined for the first time in eight weeks. National crude stockpiles also fell by 2.4 million barrels.

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The drop tightened near-term contracts relative to later-dated ones, reinforcing a backwardated structure that signals persistent tightness in domestic markets.

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Investors now face a tug of war between these supportive supply signals and the looming uncertainty around OPEC+ policy. While falling U.S. stockpiles point to a market still undersupplied, the possibility of a coordinated production increase has introduced fresh downside risk.

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As a result, positioning in oil markets could remain volatile in the weeks ahead, with traders adjusting quickly to headlines out of Sunday’s meeting.

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