. — The surge in Monday added to optimism that the road to recovery is ahead, at a time when bearish bets appear “overly pessimistic”, UBS says, and summer demand is likely to eat into global supplies.
The net length, or the difference between long and short positions, in oil markets stood at just 50 million barrels, the lowest level since 2011, while short positioning stands close to record highs, The Commitment of Traders report for the week ended Jun. 4.
“But this is is overly pessimistic,” UBS said in a Monday note, estimating that net length is “likely higher now,” and forecasting oil demand to rise between 2-to-2.5 million barrels per day between last April and August. 
Concerns about oversupply have fueled the bearish bets in oil prices, driven by a recent announcement from OPEC and its allies, or OPEC+, to begin phasing out its 2.2 million barrels per day of production cuts later this year. 
But demand isn’t as weak as feared, and there is likely to begin a lag between how fast supply grows amid ongoing OPEC cuts, albeit expected to less than the current cuts in place.   
 “[W]e expect supply growth to lag as OPEC+’s production cut extension and growth outside the group should be modest.”