Oil investors must be getting dizzy.

In the two months since OPEC began talking about capping production, speculators’ sentiment has swung wildly, with government and exchange data showing the four biggest weekly position changes ever for the two global benchmark crudes. The latest shift is to optimism, with money managers the most bullish on West Texas Intermediate oil in two years.

“Since the summer we’ve had big moves in net length,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “It usually has trended up or down over a couple of months. Now this is happening in a matter of weeks. We’re seeing huge shifts.”

Money managers reduced bets on lower WTI prices by more than half in the past three weeks as OPEC agreed to its first deal to cut output in eight years. That drove net length to the highest since July 2014 in the week ended Oct. 11, Commodity Futures Trading Commission data show. Brent longs also rose, leaving the combined length of the two benchmark contracts at the highest in at least five years.

The Organization of Petroleum Exporting Countries agreed on Sept. 28 in Algiers to trim output to a range of 32.5 million to 33 million barrels a day, which is due to be finalized at the Vienna summit next month. OPEC took a step toward coordinated supply curbs with Russia last week and will meet for a “technical exchange” to set a road map for output levels later this month.

The swings in sentiment have tracked the rocky road to $50 a barrel oil. Speculators’ combined WTI and Brent crude net position rose or fell more than 100,000 contracts four times in the past two months, the only moves of that size in CFTC and ICE Futures Europe data going back to 2011.

Prices began to rise after OPEC’s president said Aug. 8 that the group would hold informal talks in Algiers and Saudi Arabia signaled Aug. 11 it was prepared to discuss taking action to stabilize markets. Futures gave up most of those gains amid doubts that Saudi Arabia and Iran to reach an deal, before the agreement in Algiers sparked the latest rally.

“The change in tone from the Saudis is important,” said Kurt Billick, the founder and chief investment officer of Bocage Capital LLC in San Francisco, which manages about $432 million in commodities equities and futures. “Getting to a yes in Vienna is challenging. That they are willing to talk about a deal is a big change.”

Money managers’ short position in West Texas Intermediate crude, or bets on falling prices, shrank by 28 percent to 71,407 futures and options. Longs rose 1.8 percent to the highest since June 2014. The resulting net-long position increased 13 percent.

WTI increased 4.3 percent to $50.79 a barrel in the report week. Prices on Monday were down 0.6 percent at $50.04 a barrel as of 9:13 a.m.

Other Markets

In the Brent market, money managers boosted net longs by 11 percent to 396,694 during the week, according to data from ICE Futures Europe. It was the most bullish total since April.

In fuel markets, net-bullish bets on gasoline rose 19 percent to 36,650 contracts, the highest since March 2015, as futures slipped 1.1 percent in the report week. Wagers on higher ultra low sulfur diesel prices climbed 46 percent to 9,074. Futures rose 2.1 percent.

The scale of the internal differences OPEC must resolve before securing a deal to cut supply was revealed Oct. 12 as the group’s latest output estimates showed a half-million-barrel difference of opinion over how much two key members are pumping.

“The bottom line is that they’ve made an agreement,” Wittner said. “If you are going short you are betting against the Saudis, which isn’t a good thing historically.”

Copyright: Bloomberg