Oil bulls finally caught a break as prices capped their first weekly advance since November.
Hedge funds raised their net-long position in West Texas Intermediate crude by 12 percent in the week ended Jan. 13, U.S. Commodity Futures Trading Commission data show. Long wagers jumped the most since March 2011.
WTI climbed 6.1 percent in the three days following the report period, after dropping more than 50 percent since June. U.S. oil drillers took a record number of rigs out of service since Dec. 5, spurred on by OPEC's decision to maintain output. Production growth will slow this year among countries outside of OPEC, the International Energy Agency said Jan. 16.
"People are willing to buy into the market at these price levels," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Jan. 16. "It suggests that they think that the odds of us going much lower are small."
WTI fell $2.04, or 4.3 percent, to $45.89 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report, dropping to $44.20 on Jan. 13, the lowest price since 2009. Futures rallied to $48.69 by Jan. 16, bringing the advance for the week to 0.7 percent. WTI traded at $48.20 at 10:31 a.m. London time.
Oil ETFs
Investors have put $1.11 billion into the four biggest oil exchange-traded products so far this month on top of $1.23 billion in December, the biggest monthly gain since 2010, according to data compiled by Bloomberg.
The IEA lowered its non-OPEC supply growth estimate by 350,000 barrels a day last week, the first cut since the 2015 forecast was introduced in July. That will lead to a "rebalancing" of oversupplied markets in the second half, reviving prices, the agency said.
The U.S. Energy Information Administration reduced its 2015 U.S. production outlook in a Jan. 13 report by 10,000 barrels a day to 9.31 million.
The drop in the U.S. oil rig count of 209 was the steepest six-week decline since Baker Hughes Inc. (BHI) began tracking the data in July 1987. The total tumbled 55 in the week ended Jan. 16 to 1,366.
"The rig count fell pretty dramatically and people were speculating that there could be more cutbacks in production," Phil Flynn, senior market analyst at the Price Futures Group inChicago, said by phone Jan. 16. "That was a momentum changer."
OPEC Production
The Organization of Petroleum Exporting Countries kept its output above quota for a seventh month in December, according to data compiled by Bloomberg. The group, which pumps about 40 percent of the world's oil, decided in a November meeting to maintain its production target, favoring market share over higher prices.
