Brent loses momentum following decline in net-long positions

The front-month ICE Brent contract has lost by $0.62/bbl on the day, to trade at $105.02/bbl at 09.00 GMT.

IMAGE: Oil storage facility. Getty Images

Upward pressure:

Brent crude’s price has remained well supported amid ongoing risks to oil supplies from the Persian Gulf.

“Tensions in the Middle East have been rising in recent weeks as Iran intensifies attacks on tankers in the Persian Gulf,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Repeated attacks by Yemen-based Houthi militants on critical sites in Saudi Arabia, including energy infrastructure, and continued threats to oil flows through the Strait of Hormuz have put further upward pressure on oil prices.

“At least 17 vessels have been attacked since the 28 September. This is raising concerns in the shipping industry that risks taken to transit the strait are becoming too high,” Hynes said.

Downward pressure:

Money managers and hedge funds have reduced their net-long bets on ICE Brent futures in the week to 6 October – putting some downward pressure on Brent’s price.

Speculators sold a little over 3,000 lots as of 6 October, decreasing net-long positions in Brent futures to a little over 201,000 lots.

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

By Aparupa Mazumder

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