Iran + winter, hedge funds sharply increase long positions in crude oil.
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Hedge funds are accelerating their accumulation of long positions in crude oil.
According to CCTV News, on January 30 local time, US President Trump stated at the White House that the United States is deploying more naval forces toward Iran than it did during its previous action against Venezuela. Iran’s crude oil output is about 3.3 million barrels per day, accounting for roughly 3% of global supply.
In addition, WallstreetCN mentioned, a winter storm covering two-thirds of the eastern United States is severely impacting the energy system. The cold weather has disrupted operations at several refineries along the Gulf Coast and affected some domestic output.
The dual factors disturbing crude oil supply have prompted fund managers to increase net long positions in Brent crude to the highest level in nearly 10 months.
According to ICE Europe Futures Exchange data, for the week ended January 27, fund managers increased net long positions in Brent by 19,409 contracts to 377,371 contracts, the highest level since early April last year. US CFTC data simultaneously shows that speculators’ net long positions in WTI crude also climbed to a six-month high.
Geopolitical Risks Ignite Bullish Sentiment
The Trump administration’s escalated military posture toward Iran has become a key driver for this round of long position building.
On Friday, under a stronger US dollar, crude oil briefly fell along with commodity markets, but following Trump’s statement, which included a final deadline for reaching agreement with Iran, by the close of US stocks WTI crude had rebounded more than 2% from the day’s lows, to exceed $65, while Brent crude also regained its intraday losses, settling at $69.74.
In the options market, implied volatility for call options continues to maintain a high premium compared to put options, reflecting traders buying protection against potential upward price risk.
Futures curves for both major crude benchmarks have simultaneously steepened, and the premium of near-month contracts over far-month contracts has widened. This spot premium structure typically signals market expectations for tight prompt supply.
Cold Wave Hits Both Supply and Demand in the US
Winter storm Fern has dealt a dual blow to the US energy market.
Refineries along the Gulf Coast have been forced to cut or halt production in the severe cold, while domestic crude production is also affected. According to Energy Aspects, peak US crude output loss reached nearly 2 million barrels per day.
The supply tightening from the cold wave simultaneously boosted demand.
The surge in heating oil demand shifted fund managers to net long positions in the diesel market. US Commodity Futures Trading Commission data shows net long diesel positions outnumbered net short positions by 10,612 contracts.
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