In London, hedge funds and other money managers raised their bullish bets on Brent crude by 4,894 lots, or 5.7 percent in the week ended Aug. 7, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 90,959 contracts in the week ended Aug. 7, the London-based exchange said today in its weekly Commitment of Traders report. Net longs were at 86,065 on July 31, the data show.

The U.S. said yesterday one of its destroyers had a collision with a tanker near the Strait of Hormuz, a transit route for a fifth of global crude shipments. The USS Porter hit the Panamanian-flagged M/V Otowasan at about 1 a.m. local time, said Bahrain-based U.S. 5th Fleet spokesman Lieutenant Greg Raelson. The incident wasn't combat-related, he said.

"It does raise the main issue in this area," Dominick Chirichella, a senior partner at the Energy Management Institute in New York, said in a note to clients. "A large number of military vessels are patrolling the area which, as we have seen, increases the possibility of accidents and thus the potential to slow the flow of traffic through this area."

U.S. ships are patrolling the Strait as Iran has threatened to block the waterway in retaliation for sanctions targeting its nuclear program. Israeli leaders are leaning toward a strike on the country before U.S. elections in November despite opposition to such a move by the security establishment, the Haaretz daily reported Aug. 10.

David Fuller's view Over the last year, hardly a week has gone by without me receiving reports or hearing comments that an Israeli strike on Iran's nuclear facilities was either imminent or would occur shortly before or after the US Presidential Election.

 I doubt that Israel would contemplate a strike against Iran before the US election, although the risk of an eventual attack continues to increase as Persia pushes ahead with its nuclear programme. It would be naïve to think that Iran was not planning to develop nuclear weapons.

This prospect has undoubtedly prompted some hedge funds to buy oil futures, particularly the Brent contract (weekly & daily), as a hedge against weakness in stock markets in the event of a military strike. While other concerns over oil supplies may have also influenced this decision, I doubt that current industrial demand for crude oil in what remains a global economic slowdown is sufficient to justify a Brent crude price which touched $115 today. Moreover, in rallying to this price from below $90 in late June, crude oil has once again become a headwind for the global economy.