US Oil Bulls Bigger Than Those in Europe

Speculators in the US have been reading the oil price trend better in recent weeks than those in Europe -- and data shows US bulls were not only smarter in May, they were also bigger. As the Brent price was lingering around $68 for most of May, speculators betting on higher North Sea Brent prices called it a day and long positions on Brent fell 10%, while bets on lower prices increased by some 20%. In the US, funds and banks took profits early in May but came right back in to bet on higher prices. That proved prophetic in early June when oil prices closed at two-year highs, with Brent heading over $71 and US West Texas Intermediate (WTI) moving close to $69 (OD Jun.1'21). Data from the Commodity Futures Trading Commission (CFTC), the US regulator, shows that US risk capital had a net $25 billion riding on their Nymex WTI bets in late May, while funds in Europe had committed close to net $18 billion on Brent. US funds had taken some $3 billion off the table before recommitting that amount later in May, while European funds switched $4 billion away from the oil market (OD May7'21). “At these prices funds would be crazy not taking any profits,” said one US broker with a good view on funds positioning. They came back for more, since “all signs are that this market is going to go higher,” he said. The oil price rallied on Tuesday and Wednesday and moved sideways on Thursday (related). On Tuesday, Opec-plus decided to stick to its plan to add 2.1 million barrels per day to the market in the May-July period, as it follows rising oil demand from a world slowly lifting pandemic restrictions (OD Jun.1'21). Make Sure They're 'on Their Knees' Opec-plus -- led by Opec’s Saudi Arabia and non-Opec’s Russia -- is meeting again on Jul. 1 to decide on output policies starting August. Russia wants to produce more, but Opec member Iran, which has no quota, might rapidly grow output if it reaches a nuclear deal and the US lifts sanctions. Talking to reporters on Thursday, Saudi Arabia’s Oil Minister Prince Abdulaziz bin Salman declined to comment on the possible outcome of the July meeting. “We have to shroud our moves and acts in a great deal of secrecy,” the oil minister said, adding: “We have to make sure that speculators are not on their toes but on their knees.” Prince Abdulaziz has challenged speculative activity in the past, especially funds going short, betting on lower prices. He said in September that he was "going to make sure whoever gambles on this market will be 'ouching' like hell” (OD Sep.18'20). Funds are long in the US, the broker said. “The funds are on his side. I think [Prince Abdulaziz] has the wrong idea where overall funds positions are. There are no downward positions,” the broker noted. In Europe, bets on lower prices were rising just ahead of the last Opec-plus meeting. These positions had to cover their positions by buying Brent futures, further pushing the price over $70. That short-covering might show up in data to be released Jun. 4. Data from the CFTC also shows that US bulls are more brazen than their European counterparts. US speculators had bets on higher prices that were nearly 10 times higher than bets on lower prices. In Europe, that was less than four times. John van Schaik, New York