Hedge funds cut bearish oil bets before rebound

Hedge funds reduced record bets on falling oil prices ahead of the biggest two-day rally since 2008.

West Texas Intermediate futures rebounded from a 12-year low last week, part of a broad rally in global markets fueled by speculation that central banks will expand stimulus measures. Pierre Andurand, the founder of $615 million Andurand Capital Management who correctly predicted the slump in prices, said oil will end the year higher.

“Getting below $30 exceeded a lot of people’s wildest expectations,” said Andrew Lebow, a senior partner at Commodity Research Group in New York. “At that point you just begin to take a profit.”

Speculators’ short position in WTI shrank 8.4% in the week ended January 19, data from the U.S. Commodity Futures Trading Commission show. Their net-long position increased 17%.

WTI dropped 6.5% in the report week on the New York Mercantile Exchange and closed at $26.55 a barrel on Jan. 20, the lowest settlement since May 2003. Prices jumped 9% on January 22, capping the biggest two-day rally since September 2008. The front-month contract advanced 1.7% on Monday before reversing .