Speculators add net-long positions in Brent

Money managers and hedge funds added to their net-long bets on ICE Brent futures in the week to 18 March, driven by fresh buying in the global oil market.

CONCEPT: Oil pumpjacks. Getty Images

Speculators bought around 52,000 lots as of last Tuesday to leave them with net-long positions in Brent futures of about 200,000 lots, according to futures and options data from ICE Futures Europe.

The surge in net-long positions was predominantly driven by “fresh buying, but also short covering,” according to two analysts from ING Bank. The gross-long positions in Brent gained by about 40,000 lots during the week.

Speculative trading occurs when money managers and hedge funds invest based on expectations of future price movements. The increase in buying comes amid growing concerns over global oil supply, following stricter US sanctions against Iran – one of the largest OPEC producers. 

Commenting on the latest trend, ING Bank analysts said that the “speculators have become more constructive towards oil, possibly due to sanction risks hanging over the market.”

Last week, US President Donald Trump imposed another set of strict sanctions on 19 entities and vessels involved in shipping “millions of barrels” of sanctioned Iranian crude oil. 

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 the market and oil prices.

“It was the largest weekly increase in the speculative position since October,” the analysts added.

By Aparupa Mazumder

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