Bullish Bets on Oil Soared After Iran’s Attack on Israel
Following the Iranian missile attack on Israel, hedge funds and other portfolio managers boosted last week their bullish bets on Brent crude by the highest volume since 2018.
The long positions – bets that oil prices will rise – surged by the equivalent of 139 million barrels last week, according to data from Intercontinental Exchange Inc. on the commitment of traders, cited by Bloomberg. This commitment of traders report tracks the weekly period to Friday and is published under the European Union’s Markets in Financial Instruments Directive, MiFID.
The Iranian missile attack against Israel sparked an oil price rally, and Brent crude prices jumped by as much as 8% last week. Market participants started pricing in a bigger war premium, while another part of the market, those holding record short positions, scrambled to cover the shorts.
As a result, intense buying in Brent and other petroleum-linked futures ensued. Crude oil prices jumped last week by the highest weekly percentage since January 2023, as the market is awaiting an Israeli response to the Iranian missile attack. The possibility of Israel attacking Iran’s energy infrastructure isn’t being ruled out and is also fueling buying in petroleum futures.
“Brent crude is back to challenge USD 80, with activity in the options market showing increased demand for hedging the risk of further gains amid worries about a minor or, in the worst case, major supply disruption from the Middle East,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote in a report earlier this week.
Part of the rally “has been driven by wrong-footed short sellers after hedge funds, as recently as 10 September, held the first-ever recorded net short position in Brent crude futures,” Hansen added.
This week, oil prices have been volatile, but more or less steady around the $77-$78 a barrel mark for Brent.
By Tsvetana Paraskova for Oilprice.com
