Vincent Wu
Research Associate, Flux
CFTC Weekly: Brent Bulls Build Up Length
Brent bulls amass length ahead of US/Israel striking Iran; US Natural Gas shorts accelerate buying
Speculative players continued to amass bullish positions before the United States and Israel attacked Iran, as they braced for kinetic action which could lead to a disruption of oil supplies and an attempted closure of the Strait of Hormuz.
- In the week ending 24 Feb, money managers returned to a bullish posture in Brent futures, adding to their net length. Net positioning rose from 250mb to 300mb, the highest level in the year-to-date. The addition of long speculative positions was at the fastest pace since the week ending 13 Jan.
- Given the length in the market, crude prices are vulnerable to a rapid correction should the risk premia ease. However, there is also further upside for prices, as the long:short ratio is nearly at the 50th percentile for all weeks since 2013.
- Money managers were risk-on in WTI futures, adding to both long and short positions. Net positioning rose from 63.7 to 67.7mb, although net length remain below early February levels.
- In the week to 24 Feb, M1 Brent broke above the $70/bbl level and consolidated between $70 and $72/bbl, successfully filling the gap between 30 Jan and 02 Feb.
- In the refined products, **ICE gasoil** turned bullish as money managers priced in greater geopolitical risk. Long positions rose by 20mb (+18%), the highest w/w rise in four months, while short positions declined for the fourth consecutive week, and the sixth in seven weeks. The strength in ICE gasoil has exerted downwards pressure in the East/West (ICE gasoil vs Sing10ppm).
- In US gasoline, money managers trimmed short positions for the fourth consecutive week. Consequently, the long:short ratio has risen to the 80th percentile for all weeks since 2013, the highest level in three months. Short positions have fallen below 10mb, the lowest level since December.
- Similar to last week, shorts accelerated their purchases in Natural Gas (Henry Hub) over the week. Short positions rose by 21% respectively w/w, returning to a five-week high.
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