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Managed money net longs on Brent jump to new record high


Net managed money futures and options positions on the ICE in Brent, regarded as the most directionally driven speculative category, jumped 7.6%, or 14,786 positions, in the week ended 20 August, to a new record high of 208,313 positions. That was also the first time managed money net longs on Brent surpassed the 200,000 positions mark. Total Open Interest for futures and options eased slightly, down 1.1% WoW. Over the same period, Brent rose USD 0.33/bbl WoW to USD 110.15/bbl.

On the other side of the Atlantic, net managed money futures and options positions on NYMEX in WTI was down for a fourth consecutive week, dropping 6,024 positions (-2.0%) WoW to 302,762 positions. Managed money net longs are over 30,000 positions lower than the late-July peak. Total Open Interest for futures and options on WTI plummeted 18% WoW. WTI closed the week of 20 August down USD 1.87/bbl to USD 104.96/bbl. The WTI discount to Brent had widened to USD 5.16/bbl on 20 August.

At the time of writing, Brent has risen as high as USD 114/bbl. The oil price has been boosted by events in Syria, but also by yesterday’s announcement from the head of Libya’s National Oil Corporation (NOC) that the country’s production may have fallen below 200kb/d as a result of further disruption from worker strikes, we believe. Libya’s production in August might average as low as 640kb/d according to the NOC, as production was halted at the Sharara and El Feel fields. Force majeure measures on oil exports from a number of ports are still in place. Libya’s production quickly recovered following the ousting of Colonel Gaddafi in 2011 to become a stable source of 1.4mmb/d, but has been on a sharply downward trajectory since April.

With global supply/demand balances potentially tighter than the raw data suggest, news of further loss of production or perceived potential loss of production is likely to be taken as bullish for the oil price by the market. Our forecast is for Brent to average USD 106/bbl in FY13, but the risks of a higher outturn have risen given recent events.

Colin Smith, Marc Jacouris
VTB Capital analyst


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