Speculators increase net-long positions in Brent

Money managers and hedge funds boosted their net-long bets on ICE Brent futures in the week ending 27 August, driven by supply concerns in the global oil market.

PHOTO: Oil barrels. Getty Images

Speculators' net-long positions in Brent futures surged by 18,875 lots to reach 196,286 lots as of 27 August, according to futures and options data from ICE Futures Europe.

The surge in net-long positions was mainly because of escalating geopolitical conflict in the Middle East that raised supply disruption fears in the oil-rich region. Besides, US Federal Reserve (Fed) chairman Jerome Powell gave assurance of an imminent rate cut, which bolstered demand growth expectations in the country.

Speculative trading occurs when money managers and hedge funds invest based on expectations of future price movements. These positions can push Brent’s price higher or lower, creating a cycle where their actions directly influence both the market and oil prices.

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

Commenting on the latest trend, two analysts from ING Bank stated that speculative positions in the oil market remains “fairly limited due to demand concerns and the uncertainty over OPEC+ policy."

The Saudi Arabia-led coalition will likely begin unwinding its planned production cuts in October, Reuters reported citing six sources. This move is expected to add downward pressure on oil prices.

In October, eight OPEC+ members are set to increase production by 180,000 b/d as part of the group’s plan to gradually bring its ongoing output cut of 2.2 million b/d back to the market.

By Aparupa Mazumder

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