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Oil production in Venezuela: The price of oil has risen sharply in recent weeks

Photograph:? STRINGER Venezuela / Reuters/ REUTERS

Oil prices, which have been rising for months, are attracting speculators: According to a report in the Financial Times, hedge funds have greatly expanded their bets on rising oil prices. The investment professionals are betting that the price of oil will soon rise above the $100 per Barrrel mark, according to the newspaper. "The march to $100 seems unstoppable," she quotes Ehsan Khoman, head of commodity research at MUFG Bank. "The question is how long the price will stay there."

On Thursday, however, prices fell again a little at a high level. At noon, a barrel (159 liters) of North Sea Brent crude for delivery in November cost $92.70. That was 78 cents less than the night before. The price of a barrel of American West Texas Intermediate (WTI) fell by 76 cents to $88.90.

Despite everything, oil prices had marked their highest levels in ten months this week. The price of Brent had risen to more than $95. The main reason is the tight supply from large producing countries such as Saudi Arabia and Russia. In addition, demand from large countries such as the USA and China has been robust so far.

According to the Financial Times, data from exchanges and regulators suggest that hedge fund positioning has amplified the nearly 30 percent price increase since June. Especially in recent times, the funds have expanded their positions. For example, the latest data shows that the funds' combined net long position in Brent and West Texas Intermediate, the U.S. benchmark, rose by 12,137 contracts, or 000 percent, to an 35-month high of 18,527 contracts in the two weeks to Sept. 000.

In particular, Saudi Arabia's announcement earlier this month that it would maintain its voluntary production restrictions longer than previously thought has apparently piqued the interest of financial professionals. "That was the trigger," Ole Hansen, head of commodities strategy at Saxo Bank, said, according to the Financial Times. "Suddenly, it became clear to everyone that the market would continue to rise in the short term."

Saudi Arabia's energy minister on Monday defended the country's decision to further restrict production, arguing that global demand for oil could decline if global economic growth slows in the coming months.

However, there are also factors that can put pressure on the price of oil. The burden is the appreciating dollar, for example. The U.S. currency is benefiting from the prospect that the Fed's monetary policy could be tighter than previously expected. A stronger dollar exchange rate usually weighs on oil prices because the commodity is mainly traded in dollars. If its exchange rate rises, crude oil becomes mathematically more expensive for interested parties from other currency areas, which dampens demand.

Doug King, chief investment officer at RCMA Asset Management, also said he was not convinced that the price of oil would rise much higher. The strength of the market is based more on the supply constraint of OPEC+ than on particularly strong demand, he said. "The increase is not massively structural, but rather constructed," says King. "In my opinion, we are approaching the upper end of this movement, because if we go above $100 a barrel, even more barrels will probably enter the market."

Meanwhile, higher oil prices are already having an impact on equity markets. The Dow Jones US Airlines Index, for example, which tracks airline shares, has fallen 11 percent since July 24. Airlines are coming under pressure from high oil prices because the fuel for their aircraft accounts for a large part of their costs. Delta Air Lines and American Airlines, for example, have already lowered their profit forecasts for the third quarter due to rising fuel prices. The S&P 500 Energy Index, on the other hand, has risen 11 percent over the same period.

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