By Tsvetana Paraskova - Sep 21, 2018, 6:00 PM CDT
For more than a week, Brent Crude prices have been flirting with the $80 threshold as market participants have focused on the shrinking oil supply from Iran and continuous drop in Venezuela’s production.
For a couple of weeks now, investors, traders, and money managers have been increasingly bullish on Brent Crude, while Permian constraints have made them trim bets that WTI Crude prices would rise.
The bullish sentiment in Brent was further stoked this week by reports that OPEC’s largest producer and leader Saudi Arabia may now be comfortable letting oil prices rise above $80 a barrel—a possible sign that the Saudis may not be rushing to balance supply if more Iranian oil comes off the market this month and next.
The reported Saudi comfort with an $80-plus Brent price has spread to oil investors and traders. In just two days, September 17 and 18, open interest in call options—options to buy—Brent at $80 and $85 a barrel expiring next week surged by almost 45 percent, according to data by the Intercontinental Exchange compiled by Reuters.
The open interest in Brent options at $80 and $85 is now nearly half of all November call and put options at prices between $60 and $100, suggesting that investors are betting that Brent prices will cross the $80 mark very soon.
Hedge funds and other money managers raised their bullish bets on Brent in three consecutive weeks, extending their net long position in Brent by 23 million barrels to 440 million barrels in the week to September 11, exchange data compiled by Reuters market analyst John Kemp shows.
The net long position—the difference between bets that prices will rise and bets on a drop—has increased by a total of 116 million barrels over the past three weeks.
SXY Price at posting:
48.0¢ Sentiment: Buy Disclosure: Held
