(Repeats with no change. John Kemp is a Reuters market analyst. The views expressed are his own)
* Chartbook: http://tmsnrt.rs/2fmeXOd
LONDON, Aug 7 (Reuters) - Hedge funds and other money managers are becoming bullish again about oil prices, for the third time this year, as investors conclude the market is showing clear signs of rebalancing.
Hedge funds raised their combined net long position across the five major futures and options contracts linked to petroleum prices by 135 million barrels in the week to Aug. 1 (http://tmsnrt.rs/2fmeXOd).
The combined weekly increase in net long positions across Brent, WTI, U.S. gasoline and U.S. heating oil was the largest since Dec. 6, immediately after OPEC announced it was cutting production.
For the first time in months, the increase in the net long position was driven primarily by the creation of new long positions rather than covering of old short ones.
Hedge funds raised their combined long position across the five major contracts by 95 million barrels to 951 million barrels, the highest level since April 18.
Fund managers cut their combined short position across the five contracts by 40 million barrels to 239 million barrels, which was the lowest level mid-April.
The same pattern of new long building and continued short covering was apparent across all the individual crude and fuel contracts.
Hedge funds raised their combined net long position in ICE Brent and NYMEX and ICE WTI by 99 million barrels to 649 million barrels.
Long positions were raised by 70 million barrels while short positions were trimmed by 30 million, according to regulatory and exchange data.
Fund managers have boosted their net long position by more than 290 million barrels since the end of June to the highest level for more than three months.
Funds now hold almost 4.5 long futures and options positions in Brent and WTI for every short position, up from a recent low of 1.95 at the end of June.
Fund managers have also built up a large net long position in U.S. gasoline, a smaller one in U.S. heating oil, and a record net long position in European gasoil.
The petroleum markets have seen an enormous shift from extreme pessimism at the end of June to fairly hearty bullishness at the start of August.
The sentiment shift has helped lift benchmark Brent futures prices by almost $7 per barrel or 15 percent over the last six weeks.
There are some sound fundamental reasons for optimism, with signs oil stocks drawing faster than normal for the time of year and shale drilling levelling off in response to lower oil prices since the first quarter.
And Saudi Arabia has pledged to cut its exports sharply in August to accelerate the draw down in global oil inventories and market rebalancing.
The net long position in the five major crude and fuels contracts, at 712 million barrels, is still much lower than in April, when it peaked at 850 million barrels, or February, when it hit a record 1,025 million barrels.
But with so many short futures and options positions now covered, and many new longs established, it may prove tough to sustain the recent upward momentum in crude and product prices.
Crude prices are now almost back to the level at which shale producers could be tempted to start adding rigs again and hedging their output for next year by selling the calendar strip for 2018.
Hedge funds and banks have already been burned twice this year, bidding up prices, only to see shale firms sell into the resulting rally, add more drilling rigs and production, and send prices tumbling.
Fund managers cannot afford to repeat that costly mistake, which has already forced the closure of some high profile hedge funds.
So the threat of renewed rig additions and producer forward selling could cap further price increases in the short term.
"Macroeconomic risks for the oil industry", Reuters, Aug. 4
"Physical oil market tightens as refiners scramble for crude", Reuters, July 28
"Twice burned, funds wait for clear sign of oil rebalancing", Reuters, July 17
(Editing by David Evans)