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(John Kemp is a Reuters market analyst. The views expressed are his own)
* Chart 1: tmsnrt.rs/2p10Ih8
* Chart 2: tmsnrt.rs/2oSQUu5
* Chart 3: tmsnrt.rs/2p4eu32
* Chart 4: tmsnrt.rs/2pDvctm
By John Kemp
LONDON, May 2 (Reuters) - Hedge funds are losing faith that OPEC can accelerate the rebalancing of the oil market even if the group agrees to extend output cuts when it meets later this month.
Hedge funds and other money managers cut their combined net long position in the three main futures and options contracts linked to Brent and WTI by 139 million barrels in the week to April 25 (tmsnrt.rs/2p10Ih8).
The reduction was one of the largest weekly falls on record, and reverses a cumulative increase of 140 million barrels over the previous three weeks, according to data from regulators and exchanges (tmsnrt.rs/2oSQUu5).
Fund managers are now much less bullish about the outlook for crude oil prices than they were back at the start of the year.
Bullish long positions outnumber bearish short positions by a ratio of 4:1, down from 7:1 at the start of the year and a peak of more than 10:1 in late February (tmsnrt.rs/2p4eu32).
The number of long positions has fallen to the lowest level since before OPEC announced its output agreement on Nov. 30 (tmsnrt.rs/2pDvctm).
At the same time, the number of short positions has been trending higher since late February, despite periodic short-covering rallies.
Fund managers have become less bullish despite increasingly strong indications from OPEC that it will roll over production cuts for another six months.
Traders no longer believe the cuts will be enough to rebalance the market in the second half of the year even if they are extended.
In the three months from the end of November to the end of February, fund managers increasingly bet OPEC's output cuts would work.
An informal understanding between OPEC and the hedge fund community helped boost prices and give oil producers an early payback.
But the continued rise in reported crude stocks and the futures market's failure to switch from contango to backwardation has forced a reassessment.
In addition, the continued rise in shale drilling has created concerns about a big increase in oil production from the United States later in the year.
Since March, hedge fund managers have increasingly wagered OPEC's rebalancing effort will fail, weighing on prices.
Hedge funds are now less bullish even though prices are lower, which shows how much confidence in the OPEC/non-OPEC accord has fallen.
Simply announcing OPEC and non-OPEC compliance figures and an extension of the agreement is no longer enough.
Traders and fund managers are demanding evidence the agreement is working in the form of a reduction in reported stockpiles and a cut in tanker exports.
Crude stocks typically fall during the third quarter owing to the summer driving season in the United States and an increase in direct crude burning in Saudi Arabia and Iraq.
Traders and fund managers will likely evaluate OPEC's extended agreement on whether stocks fall more than normal this year and if crude loadings in the Middle East Gulf actually drop between June and September.
Editing by David Evans