Brent retreats amid decline in net-long positions

The front-month ICE Brent contract has lost by $2.80/bbl on the day, to trade at $105.24/bbl at 09.00 GMT.

IMAGE: Silhouette of oilfield workers and a pumpjack. Getty Images

Upward pressure:

Brent’s price has continued to trade above the $105/bbl mark after US President Donald Trump rejected Iran’s peace proposal to reopen the Strait of Hormuz.

“Oil began the session firmer after President Donald Trump rejected Iran’s 7-day proposal,” SPI Asset Management managing partner Stephen Innes wrote.

Subsequently, Iran’s foreign minister Abbas Araghchi said that his country is prepared to reopen the Strait of Hormuz, only if Washington accepts Tehran’s seven-day peace framework.

The latest developments solidify expectations of an extended conflict in the Middle East – enforcing the ongoing bottlenecks for commercial shipping in the Strait of Hormuz.

“[Oil] traders are not pricing an imminent diplomatic breakthrough, but neither are they pricing a permanent closure of the Strait. We remain somewhere in the uncomfortable middle,” Innes said.

Downward pressure:

Money managers and hedge funds have reduced their net-long bets on ICE Brent futures in the week to 22 September.

Speculators sold a little more than 64,500 lots as of 22 September, decreasing net-long positions in Brent futures to over 218,000 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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