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LONDON. — Despite the increase in tensions across the Middle East after the killing of an Iranian general by a US air strike, hedge fund managers added only modestly to their bullish position in petroleum last week.
Hedge funds have gambled heavily on an oil price recovery this year, pricing in accelerating global growth, restrictive output policy by Saudi Arabia and continued tension short of war between the United States and Iran.
As a result, the potential to add further bullish positions is more limited than a couple of months ago and prices are vulnerable to a sharp correction if growth disappoints or the threat of open conflict diminishes.
Hedge funds and other money managers increased their bullish position in the six most important petroleum futures and options contracts by only 19 million barrels in the week to January 7, 2020. Bullish positions increased by the smallest amount for five weeks, according to position records published by the US Commodity Futures Trading Commission and ICE Futures Europe.
On the eve of the air strike that killed Qassem Soleimani, funds had already amassed a large bullish position in crude and refined fuels such as gasoline and diesel, which may have discouraged further buying. — Reuters.
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