Hedge funds increased their bullish positions on crude oil to the highest level since June, driven by tight conditions in US markets and geopolitical uncertainties. This surge in optimism occurred just prior to indications that OPEC+ might contemplate a significant increase in output, which subsequently led to a decline in futures this week.

Money managers augmented their aggregate net-long position on West Texas Intermediate and Brent by 54,183 lots, reaching a total of 245,650 lots in the week ending Tuesday, as per data. The most significant rise since mid-June has elevated the net long WTI position from an 18-year low. The optimistic shift occurred just prior to the decline in oil prices midweek, following reports that OPEC and its allies might consider increasing output sooner than anticipated. The upcoming Sunday video conference of the alliance is drawing significant attention, with certain investors already adjusting their positions in anticipation of Brent potentially falling below $60 a barrel should another substantial increase occur.

Prior to the speculation surrounding OPEC+, oil prices experienced an uptick due to indications that US attempts to compel Moscow towards a peaceful resolution in Ukraine were failing, thereby reducing the likelihood of Russian crude becoming more accessible. German Chancellor Friedrich Merz has further dampened investors’ hopes for peace, stating that a meeting between Ukrainian President Volodymyr Zelenskiy and Russia’s Vladimir Putin regarded as a vital step toward a ceasefire — is no longer a possibility.

In the interim, data from the US government published last week indicated that inventories at the crucial storage facility in Cushing, Oklahoma, declined for the first time in eight weeks. Simultaneously, national crude inventories decreased by 2.4 million barrels, resulting in the widening of timespreads within their backwardated structures and indicating persistent tightness in domestic markets.