Speculators reduce net-long positions in Brent

Money managers and hedge funds reduced their net-long bets on ICE Brent futures for the fourth consecutive week because of negative sentiments in the oil market.

PHOTO: Oil barrels. Getty Images

Speculators' net-long positions in Brent futures dropped by 37,541 lots to reach 146,349 lots as of 23 July, declining for the fourth consecutive week, according to futures and options data from ICE Futures Europe.

Speculative trading happens when money managers and hedge funds invest with the expectation of future price movements. The positions held by money managers on speculations can drive Brent’s price up or down, leading to a cycle where their actions can influence the market and oil prices.

When speculators increase their net-long positions, oil prices usually rise; when the opposite happens, prices tend to decline. Brent’s price has experienced downward pressure this week as the global oil market is reacting to major political events in the US.

The failed assassination attempt on Republican candidate Donald Trump and President Joe Biden’s announcement to step out of the upcoming US presidential elections have caused oil traders and market analysts to increase their bets on the victory of the former US President. Notably, during Trump’s first term in office, the country's oil industry got extensive federal support to increase oil production.

This news has left room for a reduction in net long positions and an increase in short positions, signalling continued market volatility is driven by speculator actions.

“Oil prices have come under further pressure as bearish sentiment has hit not just oil but large parts of the commodity complex, leading to a large amount of speculative selling,” two analysts from ING Bank said.

By Aparupa Mazumder 

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