Hedge funds were badly caught out by the production cuts announced by OPEC at the end of last month, triggering a furious rally as managers raced to buy back loss-making short positions.
When OPEC announced a deal had been reached on Nov. 30, a substantial number of short positions were still uncovered, providing the opportunity for a classic squeeze.
Now the hedge fund community has turned its bearish position going into the meeting into the largest bullish position on record.
Hedge funds and cut their short positions in Brent and WTI futures and options by 134 million barrels in the week to Dec. 6
Fund managers also added 94 million barrels of fresh long positions, according to positioning data published by regulators and exchanges.
The shift from short-to-long amounted to a record 228 million barrels in a single week, and took the total net long position to 728 million barrels, which was also a record (tmsnrt.rs/2hm1C5f).
There has never been a comparable shift from bearishness to bullishness among speculators over such a short space of time in the last 25 years.
The scale of the turn round explains why Brent prices jumped by more than $7.50 per barrel or 16 percent in the week following the OPEC meeting.