Oil prices break through $80! Hedge funds increase bullish bets in the energy sector.

Hedge funds have increased their bullish bets in the energy sector, with crude oil prices breaking through the recent range and climbing above $80 per barrel. Gasoline prices have also surged to the highest level in months.

According to data from the Commodity Futures Trading Commission and the Intercontinental Exchange, speculators have raised their net long positions in the two major benchmark crude oil futures to a three-month high. Meanwhile, in the week ending July 25th, bullish bets in US gasoline futures alone soared to around 89,278 contracts, the highest level in nearly two years.

This bullish stance has reversed the relatively bearish trend of the past few months and is a welcome change for investors betting on a strong oil market in the second half of the year, as inventories are declining.

Daan Struyven, Head of Oil Research at Goldman Sachs, expects a significant supply shortfall in the second half of the year, with a daily deficit of nearly 2 million barrels. He predicts that Brent crude could rise to $86 by the end of this year. The International Energy Agency had previously forecasted in June that oil demand in 2023 could increase by 2.4 million barrels per day, surpassing the 2.3 million barrels per day growth in the previous year.

In recent weeks, energy prices have continued to rise despite rising interest rates, due to tight supply and strong demand. Gasoline prices have further increased due to a series of refinery issues.

Speculators have also increased their bullish bets on Nymex diesel and ICE diesel to a six-month high. Strong diesel exports help offset weak domestic demand in the United States, while Europe continues to import significant amounts of diesel from the Gulf of Mexico to compensate for reduced exports from Brazil.