4. Hedge funds Investors had lined up to back Opec’s cuts, amassing the biggest ever bet on rising prices in the first two months of this year. Across Brent and US benchmark West Texas Intermediate their net long position — the difference between bets on rising and falling prices — had reached 951m barrels, or the equivalent of 10 days of oil demand, by February 21. But oil’s failure to break higher in 2017 meant that position was getting more expensive to defend. Traders say it is not surprising funds have started to scale back their position — a move that probably accelerated after Wednesday’s drop. “We saw a situation that speculative traders held almost 12 lots of longs per short,” said Ole Hansen, analyst at Saxo Bank. “Such a scenario reduces traders’ ability to provide a solid bid into a falling market with the majority being sellers.”

The industry has squeezed down costs during the two-year downturn and executives are talking up efficiency and production gains that lead many to forecast an even bigger rebound. The speed of shale’s recovery is a reminder that the industry has to adapt to a big structural shift rather than just a short-term glut. Oil companies are directing spending towards the most productive plays such as the Permian Basin in Texas. Drilling rigs in the US are at the highest level in 18 months. Other producers, such as those focused on Canadian tar sands, have also squeezed down costs. “Given the constant improvement in Permian production-type curves and strength in Canadian production of late, it would not be entirely inconceivable to see combined US and Canadian output rising by 1m b/d in 2017,”