LONDON- Hedge fund managers have continued to take profits on their bullish positions in crude oil as the late summer rally has faded and fears about oil consumption and the state of the economy have replaced concerns over sanctions on Iran.

Fund managers cut their combined net long position in the six most important petroleum futures and options contracts by 36 million barrels in the week to Oct. 9 after trimming it by 19 million barrels the week before.

Liquidation was concentrated in Brent (-6 million barrels) and WTI (-37 million), while fund managers left positions unchanged in U.S. heating oil and added them in U.S. gasoline (+2 million) and European gasoil (+6 million).

Net positions in Brent and WTI have been cut by a total of 71 million barrels over the last two weeks after being raised by 177 million during the five previous weeks.

The earlier bullishness was driven mostly by concerns about a possible shortage of crude oil once U.S. sanctions on Iran go into effect from early November.

But in recent weeks Saudi Arabia, Russia and some other oil producers have pledged to boost their oil output to make up for any shortfall and stop prices spiralling higher.

More importantly, and possibly in response to the surge in oil prices, the U.S. government has indicated it may show some flexibility to allow refiners to continue purchasing some Iranian oil.

Portfolio managers remain relatively bullish on Brent, with net length of 476 million barrels, reflecting lingering concerns about the impact of sanctions on the availability of seaborne crude as well as the strength in global consumption.

But net long positions in NYMEX and ICE WTI have been cut to just 296 million barrels, the lowest level for almost a year, reflecting the plentiful supply of inland crude in the United States.

Overall, hedge fund managers remained bullish, with almost 10 bullish long positions for every 1 short bearish position across the six major contracts. However, the ratio is down from more than 12:1 a fortnight earlier.

Potential sanctions waivers as well as concern about consumption and the health of the global economy have tempered the earlier bullishness about prices and encouraged funds to adopt a more cautious stance.

(Editing by Jan Harvey) ((john.kemp@thomsonreuters.com; +44 207 542 9726 and on twitter @JKempEnergy))