(Repeats Jan. 9 item. John Kemp is a Reuters market analyst. The views expressed are his own)
* Chart 1: tmsnrt.rs/2jkKeOm
* Chart 2: tmsnrt.rs/2jur904
By John Kemp
LONDON, Jan 9 (Reuters) - Hedge funds amassed a record bullish position in crude oil futures and options by the end of last year, which helped drive crude prices sharply higher in the final six weeks of 2016.
Fund managers had accumulated a net long position in the three main futures and options contracts linked to Brent and West Texas Intermediate (WTI) equivalent to 796 million barrels by Dec. 27 (tmsnrt.rs/2jkKeOm).
The net position was almost double the 422 million barrels fund managers held on Nov. 15, according to an analysis of position data published by regulators and exchanges.
But most of the bullish positions were in place by the middle of December and since then there has been no further position building (tmsnrt.rs/2jur904).
The first position reports of the new year show hedge funds actually cut their combined position in the three main contracts by 6 million barrels in the week to Jan. 3.
The question is whether hedge funds are now fully invested in crude or will continue to increase their positions in the weeks ahead.
Traders have had plenty of time to digest the output cuts announced by OPEC and non-OPEC producers in November and December.
Since just before the agreements, bullish long positions have been increased by around 170 million barrels while bearish short positions have been cut by about 230 million barrels.
By the end of 2016, fund managers held the fewest short positions in NYMEX WTI since oil prices started sliding in the summer of 2014.
There are no more short positions to be squeezed, while long positions have reached their highest recorded level ("OPEC convinces hedge fund managers but must now deliver", Reuters, Dec 19).
The turnaround from bearish to bullish has been the largest in history and helped push benchmark Brent prices up by one-third or nearly $15 per barrel ("Saudi Arabia engineers big shift in oil market sentiment", Reuters, Dec. 14).
But if all the shorts have been squeezed and hedge fund managers are fully invested, the lack of new money will remove one of the factors propelling prices higher.
Once prices stop rising, they are likely to correct lower, as traders employing momentum-based strategies liquidate at least some of their long positions to lock in profits.
The large concentration of hedge fund long positions has therefore introduced an element of downside risk into the short-term outlook for oil prices.
There may be more money waiting on the sidelines ready to be committed to bullish bets on oil in the near term.
Fundamentals could also surprise on the upside if oil supply falls more than expected or consumption accelerates.
Trading is usually quiet around the Christmas and New Year period, which could explain the lack of further long-position building since the middle of December.
But the first new short positions have already started to emerge in WTI as some traders anticipate at least a temporary pullback in prices.
Fund managers added 8 million barrels of fresh short positions in the main WTI contracts on the New York Mercantile Exchange and Intercontinental Exchange in the week to Jan. 3.
These were the first significant extra short positions added since early November, suggesting at least some fund managers think prices have peaked for now.
Editing by Dale Hudson