Hedge fund managers had already closed out many of their bearish short positions in crude oil before OPEC and non-OPEC ministers met in Vienna on May 25, according to data from regulators and exchanges.
The bout of short-covering explains why oil prices rose consistently in the run up to the meeting, then sold off sharply afterwards when ministers decided to leave output quotas unchanged.
Hedge funds and other money managers raised their net long position in the three main Brent and WTI futures and options contracts by the equivalent of 89 million barrels in the week to May 23.
The net long position increased for a second week running, after rising 6 million barrels the previous week, but only after it had fallen by 308 million barrels during the three weeks prior to that.
Nearly all the most recent increase came from a sharp reduction in the number of short positions, which fell by 87 million barrels, rather than an increase in long positions, which were up by just 2 million barrels.
Hedge fund managers gradually accumulated short positions between mid-April and mid-May amid growing doubts about whether output cuts by OPEC and non-OPEC would be enough to rebalance the oil market.
But as the OPEC meeting approached, many of those short positions were closed as a precaution in case ministers decided to surprise the market by announcing a second round of cuts.
Past experience shows oil prices rise when OPEC cuts its production quotas but tend to decline if OPEC decides to leave them unchanged.
So once the meeting finished with a decision to roll over existing cuts rather than deepen them, a fall in prices became highly likely and self-fulfilling.
Hedge fund short positions in Brent and WTI more than doubled from 161 million barrels on April 18 to a peak of 356 million barrels on May 16.
But in the week to May 23, two days before the OPEC meeting, many fund managers squared up or at least reduced their bearish positions and the number of shorts had been reduced to just 269 million barrels.
Pre-OPEC short covering and its impact on prices was not restricted to crude but included refined fuels including gasoline and diesel which magnified the impact on oil prices.
Hedge funds raised their net position in U.S. gasoline by 10 million barrels and in New York heating oil by 11 million barrels, reversing an earlier fall in net positions.
As with crude, most of the adjustment came from a reduction in short positions rather than initiation of fresh longs.
Fund managers cut short positions in gasoline by 14 million barrels and short positions in heating oil by 13 million.
With so many short positions eliminated in the run up to the OPEC meeting, mostly for tactical reasons, it was no surprise oil prices tumbled afterwards when ministers did not deliver a surprise cut.