Funds add net-length in Brent by cutting shorts

London, (Quantum Commodity Intelligence) - Funds liquidated more bearish than bullish bets in Brent futures and options on the ICE exchange last week, but there was only a modest recovery in net-length from the crash two weeks ago, the Commitment of Traders Report shows this week.

Managed money category cut 8,922 short lots and 2,073 long position in Brent over the week to March 30, creating a net-length gain of 6,849 lots.

The strength of the dollar index, which climbed to a year high peak of 93.3 points by March 30, will have generated selling interest, but speculators still remained spooked by the third wave of Covid-19, particularly in Europe where many countries have introduced full or partial lockdown measures.

Two weeks ago, funds cut 36,650 long lots and added 14,823 short lots in Brent futures and options.

This week's trading lifted speculative net-length to 289,799 lots, but it was still down 44,624 lots compared to March 16.

Brent prices rallied last week in anticipation of OPEC rolling over its production targets from April into May, but the market has been volatile.

Front month May Brent traded in a $4.10/bbl range on March 24 between a low of $60.47/bbl and a high of $64.57/bbl.

Although prices gained, open interest in Brent futures and options fell for the second week in a row, shedding just over 100,000 lots, adding to the 214,000 lot loss in the week to March 23.     

Speculative net-length in Brent hit a peak this year at 348,784 lots in the week to February 23, when funds held 414, 238 long lots and 65,454 short lots.

At the time, net-length accounted for 10.16% of open interest in Brent futures and options.

By the end of March, net-length has dropped to 289,779 lots, and funds have cut long bets to 326,745 lots and increased short bets to 83,976 lots.   

For the latest reading, speculative net-length now only accounts for 8.87% of total open interest.

However, funds are much closer to recovering their net-length in European distillate futures compared to the middle of March.

Funds added 1,472 long lots and cut 3,925 short lots in Low Sulfur Gasoil futures and options over the week to March 30.

The 5,397 gain in net-length reversed half the 10,148 lot loss a week earlier, and left total net-length in European distillates futures and options at 101,262 lots, down only 4,751 lots from March 16.