Oil gains as bullish bets on rising prices hit record high

Reuters: Oil prices rose on Monday as investors showed record confidence in prices rising further, though gains were capped by the prospect of faster growth in US oil production.

Brent crude oil rose 55 cents to $ 56.54 a barrel by 1053 GMT, while US West Texas Intermediate added 39 cents to $ 54.38.

Money managers raised their bullish US crude futures and options positions in the week to 21 February to the highest on record, the US Commodity Futures Trading Commission (CFTC) said on Friday.

“Oil prices are being supported by the ongoing buying interest shown by speculative financial investors, who for the first time expanded their net long positions in WTI to more than 400,000 contracts,” Commerzbank analyst Carsten Fritsch said in a note.

Speculators also raised their bets on a rally in Brent crude futures to a record high in the week to 14 February, with fresh data expected to be released later on Monday.

“With speculators increasing their bullish bets on US crude to an all-time high, the risk of disappointment and subsequent downward spiral in prices has never been greater,” oil brokerage PVM’s Stephen Brennock said.

Among the risks is the level of compliance to the deal between the Organization of the Petroleum Exporting Countries (OPEC) and other producers to bring down oil output by about 1.8 million barrels per day (bpd).

OPEC’s record compliance with the deal has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq, have pledged to catch up with their targets.

The International Energy Agency put OPEC’s average compliance at a record 90% in January. Based on a Reuters average of production surveys, compliance stands at 88%.

A Reuters survey of OPEC production later this week will show compliance for February.