Hedge funds turned the most bullish on Brent oil in six years at the outset of one of the crude market’s most volatile weeks ever.
Money managers increased net-long positions on the global benchmark by 65,438 lots to 351,032 in the week ending March 10, weekly ICE Futures Europe data on futures and options show.
That’s the highest since February 2020. Meanwhile, bullish bets on US oil rose to an eight-month high, data from the Commodity Futures Trading Commission show.
The Iran war has brought traffic at the Strait of Hormuz, a critical chokepoint that normally carries about one-fifth of global oil supplies, to a near-halt for almost two weeks. The prolonged disruption caught market participants off guard, many of whom had expected the US-Israeli campaign to be surgical.
The seismic shock to energy markets has forced major crude producers across the region to curb output as storage capacity fills, while some refiners default on contracts.
In paper markets, several volatility gauges have risen to their highest since the Russian invasion of Ukraine. In response, algorithmic traders have ramped up long positions to their limits and depressed options trading as dealers roll back risk exposure.
Oil producers have also flooded into the market to lock in future revenues, while consumers panic shop for hedges to protect against spiraling prices.
