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Speculative positions: Bullish numbers


Net managed money futures and options positions on NYMEX in WTI, widely recognized as the most directionally driven speculative category, rose for the seventh week in a row in the week ending 29 January, up 6.2% or 12,701 positions WoW to reach 218,604 positions. That was the highest net long position since May 2012, and comes on the back of yet more bullish economic data, and a likely strengthening appetite for risk.

Other data reported yesterday by the Commodity Futures Trading Commission (CFTC) for the week ended 29 January showed net short swap dealer positions increasing 8.1% WoW to a record 322,712 positions. WTI recorded a seventh consecutive weekly gain, up USD 1.62/bbl, +1.7% WoW to reach USD 97.44/bbl in the week ending 1 February. However, WTI’s discount to Brent widened on continued reduced levels of capacity at the Seaway pipeline, which might now affect capacity until late 2013. The Seaway pipeline was recently expanded to 400kb/d, from 150kb/d, enabling more crude to be transported from Cushing, Oklahoma to refiners on the US Gulf Coast and is the principal reason for the recent narrowing of WTI’s discount to Brent, we believe.

On the other side of the Atlantic, net managed money futures and options positions on the ICE market in Brent, shot up 16.8% WoW, or 25,822 positions, to 179,735 positions resulting in a new record high in net long managed money position. That coincided with Brent rising USD 1.94/bbl (+1.7%) WoW to USD 114.36/bbl. However, trading volumes have been shifting to the Brent market, driving an increase in the scale of that market as WTI has lost its reputation as a reliable price indicator for global oil prices, we understand.

Brent has steadily risen since mid-January and even hit a recent intraday recent high of USD 117/bbl on the back of positive economic data and a rise in geopolitical concerns over the MENA region. However, Brent closed lower yesterday on a perceived positive development over Iran’s nuclear programme, as the US offered direct negotiations with Iran. It is our view that the Iran factor will probably have less potency in terms of its impact on oil prices this year.

Colin Smith Marc Jacouris, CFA
VTB Capital analyst


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