Speculators cut net-long positions in Brent

Money managers and hedge funds have decreased their net-long bets on ICE Brent futures in the week to 9 September.

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Speculators sold over 41,000 lots as of last Tuesday, decreasing net-long positions in Brent futures to a little short of 210,000 lots.

The gross-long positions in Brent decreased by over 27,500 lots during the week, according to futures and options data from ICE Futures Europe.

The decline in net-long Brent positions stems from fading oil demand growth expectations and heightened worries of a potential supply glut in 2025 and 2026, according to market analysts.

Notably, the International Energy Agency (IEA) has projected in its latest oil market report, that the global oil market will stay heavily oversupplied, as weak demand continues to outweigh the pace of supply returning to the market.

Moreover, the front-month ICE Brent contract has lost some momentum in recent days after the OPEC+ oil producers group agreed to collectively increase supply by 137,000 b/d in October, marking the sixth consecutive time that they plan to expedite production.

Eight OPEC+ members carried out two rounds of voluntary production adjustments in 2023 – a 1.65 million b/d reduction in April, and a 2.2 million b/d cut in November.

The group is on track to fully unwind their joint 2.2 million b/d output cuts this month, ahead of its schedule, while the latest announcement marks the beginning of easing the 1.65 million b/d reduction.

Commenting on the latest positions data, two analysts from ING Bank noted that, “the move largely follows OPEC+’s latest decision to boost its oil production, along with the IEA’s latest projection for a record oil surplus for the next year.”

When speculators reduce their net-long positions, oil prices typically decline. Conversely, when they boost these positions, prices tend to rise, leading to a cycle where their actions can influence oil prices and the market.

By Aparupa Mazumder

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