Hedge funds raise bullish oil bets to highest since May as Iran war escalates
Hedge funds have turned the most bullish on Brent crude since May as renewed fighting between the U.S. and Iran raised concerns about disruptions to supplies through the Strait of Hormuz. Bets on higher U.S. crude, gasoline and diesel prices also increased.
According to Bloomberg, money managers increased their net-long position in Brent by 37,837 contracts to 261,435 in the week ended September 1. ICE Futures Europe data on futures and options showed the position reaching its highest level in more than three months.
Meanwhile, net bullish bets on U.S. crude rose to their highest level since June, according to data from the U.S. Commodity Futures Trading Commission (CFTC).
War raises risks to supplies through the Strait of Hormuz
Oil resumed its advance following a new round of U.S. strikes and Iranian retaliatory attacks on American military bases. The escalation has complicated efforts to restore shipping through the Strait of Hormuz, one of the world's most important routes for energy trade.
Before the latest escalation, vessel traffic through the strait had been gradually recovering. However, renewed Iranian attacks on ships transiting the waterway have once again increased the risk of prolonged supply disruptions.
Tensions intensified after Iranian strikes on targets in Jordan, Kuwait and Bahrain. Israel, in turn, warned that it could strike civilian infrastructure if attacked by Tehran.
Traders are concerned not only about potential losses in production but also about further restrictions on the transportation of oil and refined products from the region. The military escalation is therefore adding a geopolitical risk premium to energy prices.
Bullish gasoline bets reach highest since December
The impact has been even more pronounced in refined products. The simultaneous effects of conflicts in the Middle East and Ukraine have pushed diesel prices higher, while net bullish bets on the fuel have climbed to their highest level since March.U.S. retail diesel prices rose to a record $5.85 per gallon on Thursday.
Net-long positions in gasoline increased to 89,263 contracts, the highest level since December. For early September, the figure is the highest on record, as gasoline prices remain at record levels for this time of year.
Rising oil prices are increasing pressure on the U.S. administration while also making alternative sources of supply more attractive. Against this backdrop, companies linked to President Donald Trump are seeking access to Venezuela's oil sector following changes in the country's political situation.
Their interest extends beyond crude oil production to other parts of the industry. The activity comes as the White House seeks to demonstrate the results of its Venezuela policy amid rising fuel costs for U.S. consumers.
Earlier, we reported that the Middle East crisis pushed oil above $100 per barrel amid a sharp decline in supplies. Disruptions to export flows heightened concerns about crude availability and became one of the key drivers of the rise in global oil prices.
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