Speculators Massively Cut Their Bullish Bets On Oil

Portfolio managers cut their bullish bets on Brent Crude by the most in years in the week to March 8, according to data from futures exchanges compiled by Bloomberg.

After Russia invaded Ukraine at the end of February, oil prices spiked to above $100 per barrel for the first time since 2014, and ran to almost $140 per barrel on Monday, March 7—the highest price since 2008, after the United States said it was in “very active discussions” with European allies to ban imports of Russian oil. Prices slumped later in the day after Europe and German Chancellor Olaf Scholz said they would not be banning Russian oil because, right now, it is necessary to keep economies running.

The spike in oil prices and the heightened volatility has led to many hedge funds and speculators to close out long—or bullish—positions.

In Brent Crude, the retreat was driven by the largest reduction in outright longs since 2018, according to Intercontinental Exchange data cited by Bloomberg.

As prices spiked and volatility jumped, speculators cut their combined long in WTI Crude and Brent Crude by 100,000 lots to 435,000 lots in the week to March 8. The largest one-week reduction since July was led by a 38 percent cut in the Brent long, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, commenting on the data from the exchanges. The net longs in all fuels were reduced despite the fact that prices surged between 20 percent and 42 percent, he added. 

The massive cut in the Brent long was driven mostly by a pullback in outright longs, but also by the biggest addition in short bets (+33.6k lots) since 2016, Hansen said.

“Overall it was another week where surging volatility across most commodities saw money managers cut both long and short positions,” he said, adding that “Increasingly difficult market conditions helped trigger a 180k lots reduction across oil, fuel products and natural gas while net length was added to most other sectors led by grains and softs.”

By Tsvetana Paraskova for Oilprice.com

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