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London - Despite the surge in US oil prices, hedge funds are still divided about what will happen next, according to the latest data from the Commodity Futures Trading Commission (CFTC).
Hedge funds and other money managers held long positions in WTI-linked futures and options equivalent to 396 million barrels of oil on April 14.
But the hedge fund community also had 150 million barrels of short positions, betting on a fall in prices, CFTC data show.
The ratio of hedge fund long to short positions, at just 2.65 to 1, remains unusually low compared with recent years and is still below the level in January and February.
In fact, the CFTC data identifies more separate large short positions (92) than long ones (78), implying more hedge funds are bearish rather than bullish, though the bulls on average hold bigger positions.
The positioning data confirm that the market remains deeply divided about the outlook for oil prices, especially in the US domestic market.
Bulls point to the sharp drop in the number of rigs drilling for oil, down by almost 55% since early October, and the expected fall in US oil output over the next six months.
Bears focus on the absence of any hard evidence of a fall in production, as well as the build up of almost 100 million barrels of extra oil inventories since the start of the year, and increases in Saudi production.
Front-month futures prices have already jumped by $14 per barrel, 33%, over the past month and are now trading at $56 per barrel.
Posted prices in North Dakota's Bakken region are up by $18.50 per barrel, 67%, to almost $45, according to Plains Marketing.
The typical wellhead price in North Dakota, approximately the average of the WTI futures price and posted prices, is now $50 per barrel, up from less than $40 a month ago.
Prices are now high enough to support new drilling in the core of the Bakken area, based on estimates for breakevens published by North Dakota's Department of Mineral Resources back in January.
For bears, the rebound has come prematurely and threatens to restart drilling before the oversupply has been eliminated and excess inventories worked off.
That may overstate the risk, but the bullish case is far less strong at $56 for WTI (and $63 for Brent) than it was when WTI was trading at less than $45 a month ago.
In the medium term, producers probably need prices between $60 and $75 per barrel to sustain output and meet growing demand.
Brent is already trading at the low end of this range, and WTI is not far below it, which suggests the outlook is more balanced than earlier in the year.
