Traders pile into bullish bets on oil futures

The structure of the global Brent crude benchmark -- price spreads from one month to the next -- is the most bullish in eight years, as supply grows increasingly tight. At the same time, money managers lifted their wagers on comparable U.S. contracts by the most since late-2017 in the week to Jan. 25.

Over recent weeks backwardation -- where more immediate contracts fetch greater premiums -- has strengthened sharply and headline prices hit fresh seven year highs. The surge comes as demand expands faster than supply, and outright crude prices trade near their highest level since 2014.

The Brent’s market’s structure is surging ahead of the expiration of the March contract on Monday, with key North Sea swaps markets also moving sharply higher. While traders often disregard such moves, the following months are already pricing one of the most bullish markets in years, indicating that the strength is set to linger.

Still, it is WTI that remains the oil futures contract with the most bullish bets relative to bearish ones. Speculators last week held almost 13 long positions for each short, as traders bet that stockpiles will continue to tighten in the coming quarter.