Traders hiked bullish crude bets before Saudi, Russia cuts

Quantum Commodity Intelligence – Investors increased bullish crude bets in the days before Russia and Saudi Arabia announced production cuts for the rest of the year, helping to send Brent futures above $90/b for the first time since last November.   

Money managers increased long Brent positions to 273 million contracts in the week to 5 September, according to the latest exchange data, and cut shorts by 49 million.

That pushed net long positions up 11% to a three-week high 223.7 million barrels.

Traders were most bullish on US crude, and hiked net long WTI positions 36% on the week to a 15-month high 233 million barrels.

That came in the days leading up to Saudi Arabia and Russia's decision to extend voluntary production cuts for the rest of the year, which is set to push the market into an increasing supply deficit.

That is most obvious in US crude stocks, which declined for the fourth consecutive week to a 10-month low at the start of September.

The US has stepped up to replace some of the lost Russian and Saudi crude, exports reaching nearly 5 million bpd – its most since late July.

Diesel, gasoline

As heavy crudes yield more distillates, the cuts helped push diesel refinery margins in northwest Europe back above $40/b last week on concerns over supply.

Traders were nonetheless cautious as talks progressed over strike action in Australia's LNG sector, which ultimately failed to find an agreement and propel diesel cracks even higher by the week's end on concerns over heating demand this winter.

Investors trimmed net long ICE gasoil positions by 8% to a six-week low 59.6 million barrels, and cut bullish bets on ULSD by 3% to 36 million barrels.

Traders also wound down bullish gasoline bets as the peak summer driving season draws to a close, net long RBOB positions down for the third straight week to a seven-week low 64.4 million barrels.