Net-short positions in Brent emerge for the first time

Money managers and hedge funds held net-short bets on ICE Brent futures for the first time, due to mounting demand growth concerns in the global oil market.

PHOTO: Oil pumpjacks with the Chinese flag in the background. Getty Images

Speculators sold 54,325 lots in Brent futures over the last reporting week, leaving them with net-short positions of 12,680 lots as of 10 September, according to futures and options data from ICE Futures Europe.

The surge in net-short positions in Brent for the first time was driven by a “combination of longs liquidating and fresh shorts,” primarily due to the growing concerns of an apparent slowdown in Chinese oil demand, two analysts from ING Bank remarked.

When speculators boost their net-long positions, oil prices typically rise; conversely, when they reduce these positions, prices tend to decline.

Speculators' gross-long positions fell by 33,861 lots over the week, while the gross-short positions increased by 20,464 lots, signalling a bearish sentiment. According to energy investor and market commentator Eric Nuttall, the financial demand for crude oil, known as “net length,” has dropped to its lowest level in history.

China imported 11.56 million b/d of crude oil in August, down from 12.43 million b/d imported during the same time a year back, according to data from the General Administration of Customs (GACC).

Chinese crude oil imports last month were about 7% lower on a year-on-year comparison. The sharp drop in China's crude imports has suggested a significant slowdown in oil demand growth in the world’s second-largest crude oil-consuming nation, according to oil market analysts.

“Demand fears have left speculators increasingly bearish towards the oil market,” ING Bank’s analysts said.

By Aparupa Mazumder

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