Five weeks ago there was a strongly bullish orientation with long positions outnumbering short positions by a ratio of 2.58:1 (23rd percentile) to 5.93:1 (80th percentile).
The fastest ratios are concentrated in Brent (86th percentile), US gasoline (85th percentile) and US diesel (86th percentile), with low optimism regarding European gas oil (65th percentile) and WTI (41st percentile).
Refinery maintenance in the United States is expected to reduce fuel inventories there, but keep WTI prices trailing Brent, which probably explains the differential performance.
Hedge funds rallied about Brent more quickly than at any time since May 2019, before the pandemic erupted and the oil industry surged.
Tensions are rising at the heart of the investor position.
In the bond market, investors are increasingly confident that inflation will subside, allowing central banks to quickly end interest rate hikes.
In the oil market, investors are increasingly convinced that continued growth will reduce supply and drive prices higher.
But this would be inflationary – and runs contrary to the benign outlook taken by the bond market.
Both the oil trader and the bond trader cannot be right.
John Kemp is a Reuters Market Analyst. The views expressed are his own.