Hedge fund bets on Brent price rise hit highest since 2020. What it means

Hedge funds have taken the most bullish stance on Brent crude in six years ahead of this week, which has been one of the most volatile weeks in the market's history, Bloomberg reported.

Asset managers increased long Brent positions by 65,438 contracts to 351,032 in futures and options in the week ended March 10, according to ICE Futures Europe. That's the highest level since February 2020, Bloomberg claims. At the same time, bullish bets on U.S. WTI crude rose to an eight-month high, the agency cited data from the U.S. Commodity Futures Trading Commission.

The U.S.-Israeli war with Iran has halted ship traffic through the Strait of Hormuz, a key maritime transportation hub through which about a fifth of the world's oil supply normally passes. Major oil producers in the region have cut production as storage facilities fill up, and some refineries have begun defaulting on contracts. In the "paper" market, where derivatives are traded, several volatility indicators rose at once to their highest levels since February 2022. In response, algorithmic traders increased long positions to extreme levels, and activity in the options market declined as dealers reduce risk exposure, Bloomberg writes.

Oil producers are actively entering the market, locking in high prices for future supplies, while consumers are hastily hedging risks in an attempt to protect themselves from skyrocketing prices, the agency explains.

On Friday, WTI crude futures rose by 3.1% to $98.7 per barrel. Brent added 2.7%, reaching $103.1 per barrel.

This article was AI-translated and verified by a human editor