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Oil Investors Raise the Bet on Higher Prices and Lose 

April 28, 2017

Mark Shenk, Bloomberg Markets

The shale boom is making it hard to be an oil optimist. 

While hedge funds raised their bets on rising prices, the market tanked. Money managers boosted wagers on higher West Texas Intermediate crude for a third week as of April 18, U.S. Commodity Futures Trading Commission data show. The next day, futures tumbled after a report showed U.S. output rose for a ninth straight week. Prices continued to fall even after Saudi Arabia said exporters have reached an initial deal to extend production curbs past June.

"Based on what happened the rest of the week, this will be the last hurrah," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "There was a narrative that the OPEC/non-OPEC cuts would be effective and balance the market. The narrative unraveled by the end of the week."

 

Oil futures touched an 18-month high on the first day of trading this year as an accord between the Organization of Petroleum Exporting Countries and 11 other producers to cut output for six months came into effect. The increase in prices had the unintended effect of spurring drilling in U.S. shale basins.

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