Funds shun Brent to add bullish bets in Low Sulfur Gasoil futures
London (Quantum Commodity Intelligence) - Funds liquidated bullish bets in Brent on the ICE bourse again last week, despite a slide in the dollar, and continued to pile up length in the safer bet of Low Sulfur Gasoil futures, the Commitment of Traders report shows.
Money managers cut another 4.123 long lots in Brent futures and options over the week to May 18, adding to the 14,452 long lots cut the week before.
Meanwhile, they added 5,710 short lots in the crude benchmark, adding to the 6,285 shorts added in the previous week.
Open interest in Brent futures and options gained for the third week in a row, up by another 77,854 lots, to 3.23 million, and the dollar index dropped to 89.75 points by May 18, down from 90.14 points on May 11.
But funds cut net-length by 9,833 lots.
Funds boost gasoil lenght
In contrast, funds added bullish bets in Low Sulfur Gasoil futures and options for the sixth week in a row, cut bearish bets in the European distillate future for the third week in a row.
Funds added 4,887 long lots and cut 100 lots in Low Sulfur Gasoil futures and options, and were left holding 153,705 long lots by May 18, almost 15 times more than their short holding of 10,350 lots.
Bullish bets in Low Sulfur Gasoil futures accounted for 14.21% of open interest, while bearish bets were less than 1%.
Middle distillate cracks have surged throughout May as European governments eased lockdowns, and the market eyed a return to normal demand.
Cracks for ultra-low sulfur diesel (ULSD) barges versus front month Brent futures climbed to $6.35/b by May 18, up from $4.29/b on April 30, Quantum data shows.
Cracks improve along the forward distillates curve.
The January paper in ULSD barges was trading above $9/b versus Brent last week.
Brent has been highly volatile recently, with the threat of fresh Iranian barrels seeping onto the market this summer if a new nuclear deal can be agreed with Washington adding to fears the OPEC+ alliance will crack and flood the market with too many barrels too soon.
July Brent futres settle $66.44/b Friday, compared to the Friday's settle of $68.71/b
