01 January 2019, News Wires — Hedge funds are keeping their cool in the most tumultuous end of the year for oil since the 2008 financial crisis, betting on better days ahead.
They boosted wagers on rising Brent prices for a third straight week amid expectations that OPEC and allies will follow through on a deal to reduce output. The vote of confidence comes against a backdrop of turmoil in financial markets that saw one measure of oil-price volatility jump the most on record in November and head for its highest year-end level in a decade.
“There is a little more optimism and neutrality coming into markets and we’re getting some positive signs,” said Ashley Petersen, an oil analyst at Stratas Advisors LLC in New York. “It’s not as if demand is tanking tomorrow and supply is going to triple. We’re seeing a little more rationale enter markets, a little more of a wait-and see mode.”
Although the global crude benchmark has declined about 15 per cent since OPEC and its allies came together and announced an agreement to reduce output on December 7 — extending its plunge since early October to 40 per cent — producers have signaled dedication to the deal.
OPEC and its allies aim to publish a statement in January on the implementation of the agreement to cut production, according to Russia’s Energy Minister Alexander Novak. He also said the market may see the impact of the cuts in January or February, and if necessary, the group can convene before its scheduled meeting in April. At the same time, a decline in Iranian imports to Japan adds another positive sign.
“OPEC has done a pretty good job indicating that they are going to hold compliance,” said Brian Kessens, who helps manage $16 billion in energy assets at Tortoise in Leawood, Kansas.