Money Managers Cut Bullish Oil Bets for Second Straight Week, COT Data Show
Key Takeaways
- •Portfolio managers cut bullish positions in both WTI and Brent crude futures for a second straight week ending August 4, reflecting growing caution among speculators.
- •The net long position in NYMEX WTI decreased by 7,257 lots to 101,050 lots, while the ICE Brent net long fell by 20,361 lots, or 11%, to 164,722 lots.
- •The combined crude net long position dropped by approximately 25,000 contracts to 266,000 contracts, following 171,000 lots of net buying over the previous three weeks.
- •Crude prices opened the new week higher after Iran outlined six demands for a peace deal with the United States and Houthis claimed to have struck an Aramco refinery in Jazan.
- •Strategists from ING and Saxo Bank noted that speculative sentiment turned more cautious despite persistent geopolitical supply risks and limited conviction in a sustained price rally.
Money managers have trimmed their bullish positions on both Brent and WTI crude futures for a second consecutive week, even as little headway has been made toward a potential reopening of the Strait of Hormuz, a narrow channel through which roughly a fifth of global oil consumption routinely passes.
In the reporting week ending August 4, portfolio managers reduced their net long position in NYMEX WTI by 7,257 lots, bringing it down to 101,050 lots, according to exchange data. The net long position in ICE Brent crude oil futures—the differential between bullish and bearish bets—was cut by 11%, or 20,361 lots, to 164,722 lots.
The decline marks the second straight weekly drop in speculative positioning across the two major crude oil benchmarks, reflecting growing hesitation among traders and speculators to increase bullish wagers on a price rally. The positioning data, tracked weekly through the CFTC's Commitments of Traders report and ICE's equivalent, is closely watched as a gauge of how non-commercial market participants—primarily hedge funds and other money managers—are leaning on oil.
Over the past two weeks, oil prices have eased amid hopes that the Strait of Hormuz could reopen and that Iran and Oman might reach an agreement on the joint management of certain shipping lanes.
"Speculative sentiment turned more cautious last week," ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note issued early Monday.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, observed that the energy complex saw reduced exposure in the weekly Commitment of Traders report through August 4, despite ongoing supply risks.
"Renewed price weakness drove a 25k reduction in the combined crude net long to 266k contracts, following 171k of net buying during the previous three weeks," Hansen said.
"Despite persistent geopolitical supply risks, positioning continues to signal limited conviction in a sustained price rally," Hansen added.
Crude oil prices, meanwhile, opened the new week on an upward note. The gains followed a statement from Iran outlining six demands for a peace deal with the United States, along with claims from the Houthis that they had struck an Aramco refinery in Jazan.
As of 10:00 a.m. ET, Brent front-month futures were up 2.70% at $85.81. The U.S. benchmark, WTI Crude, was trading 2.69% higher at $80.28.
By Michael Kern for Oilprice.com