Speculators increase net-long positions in Brent

Money managers and hedge funds have increased their net-long bets on ICE Brent futures in the week to 8 July.

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Speculators bought a little over 55,000 lots as of last Tuesday, increasing net-long positions in Brent futures to more than 222,000 lots, according to futures and options data from ICE Futures Europe.

The increase in net-long positions was predominantly driven by fresh longs entering the global oil market, following recent escalation of geopolitical tensions in the Middle East, according to market analysts. The gross-long positions in Brent gained by over 41,000 lots during the week.

Front-month Brent has gained some support in recent days on the back of rising geopolitical risks in the oil-rich Middle Eastern region, with renewed attacks on commercial ships in the Red Sea.

Last week, Yemen-based Houthi militants launched a drone and speedboat assault on the Liberian-flagged bulk carrier Eternity C off the coast of Yemen – the second such incident in a single day.

“Speculators appear to be influenced more by short-term dynamics [like missile attacks on commercial ships] rather than the medium-term outlook,” said two analysts from ING Bank.

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

“The oil balance suggests the market should be tight through the third quarter, before moving into a large surplus from the fourth quarter,” ING Bank analysts added.

By Aparupa Mazumder

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