According to the weekly Commitments of Traders report from the Commodity Futures Trading Commission, there was a 67 per cent rise in long positions on oil on the New York Mercantile Exchange (Nymex) in the week up to July 13th 2010 - representing the highest figure for the market since February 2007.
However, the positivity among hedge funds was not matched in reality, as oil fell for four out of the five days on the Nymex last week to close down 0.1 per cent.
In the preceding week, oil had risen 5.4 per cent, the highest weekly gain since May.
Hamza Khan, an analyst with Schork Group, told Bloomberg: "Just like last week, when they were short when prices were up, now they were long when prices were down."
Earlier this month, accountancy and auditing firm Rothstein Kass predicted that 2010 will be a "trying" year for hedge funds, as a result of increased regulation and greater competition for investors, reported Reuters.
By Tony Aynsley