LONDON, March 26 (Reuters) - Fund managers have rushed

to buy copper after the price broke up out of its one-year

trading range earlier this month.

Activity has surged on all three global exchanges with money

managers lifting bullish bets on both the London Metal Exchange

(LME) and the CME copper contracts. Market open interest

on the Shanghai Futures Exchange (ShFE) has jumped to

life-of-contract highs.

Much of the investment community had stayed away from

copper's sideways churn over the last year but funds are now

clearly re-entering on the long side after LME three-month metal

leapt to an 11-month high of $9,164.50 per metric ton on

March 18.

A fresh technical picture and signs of supply stress have

served to rekindle copper's bullish flames. However, they could

yet be doused if the market can't hold its recent gains.

BULL STAMPEDE

Money manager long positions on the CME copper contract

jumped by 43% to 99,829 contracts in the week to March 18,

according to the latest Commitments of Traders Report (COTR).

It's the largest outright fund long position since May 2021.

Net long positioning of 39,270 contracts is the most bullish

it's been since this time last year when the market was still

pinning its hopes on a post-lockdown growth surge in China.

The bulls have been stampeding into the London market as

well. Investment fund long positions soared to 70,293 contracts

in the week to March 15. It's the heaviest cumulative bet on

higher prices since the LME started publishing its COTR in 2018.

There are still plenty of fund shorts around and net long

positioning of 37,863 contracts is the highest in "only" two

years.

Positioning in the LME's "Other Financial" category, which

includes commodity index providers and insurance companies, has

also started turning more bullish. The net long position has

grown to 11,693 contracts, also a near two-year high.

There is no comparable COTR in China but it's clear that

copper's break of trading range has put it on the radar of the

local investment community.

Market open interest on the Shanghai copper contract

rocketed from 388,000 contracts at the start of the month to

566,000 on March 15. It has since retreated marginally to

533,000 contracts.

KEY PRICE LEVEL

The trigger for all the excitement in the previously torpid

copper market was a commitment by Chinese smelters to restrain

output in the face of a tighter-than-expected raw materials

market.

What exactly this means for the supply-demand balance in the

refined segment of the supply chain remains uncertain. There is

a good deal of scepticism among analysts as to how many smelters

will actually cut production rather than re-schedule maintenance

shutdowns or defer new capacity.

It has, though, refocused attention on copper's stretched

supply dynamics, a feature of the market that has been

overshadowed by a weak demand picture over the last year or so.

Clearly, plenty of fund managers are buying into the change

of narrative but whether others will join them depends on

whether copper can consolidate its chart gains.

The most recent COTRs capture the build in long positions

just before copper peaked above $9,000 per ton. Much of the

money entering the market was likely reacting to the chart break

and the resulting upwards price momentum.

LME three-month copper has since retraced all the way to a

current $8,860 per ton, a key technical level that acted as

resistance in the previous year-long trading range and which,

bulls hope, will now provide support for a new higher range.

If that resistance-turned-support thesis holds,

heavier-weight money may well follow the shorter-term technical

funds into the market. If, however, copper can't hold its gains

and falls back into the old range, some of its new fund friends

may disappear as quickly as they came.

The opinions expressed here are those of the author, a

columnist for Reuters

(Editing by David Evans)