Money managers cut their combined net long position in Brent and WTI crude by 78,492 lots in the week ended November 3, leaving 272,075 lots, according to ICE Futures Europe and Commodity Futures Trading Commission data compiled by Bloomberg. It was the largest weekly reduction in bullish crude bets since June, when the United States and Iran reached an interim agreement on reopening the Strait of Hormuz.
The dollar picture tells the same story. Robert Quinn of Goldman Sachs, analysing the CFTC data, found that managed money sold a net 6.6 billion dollars of Brent positions between October 27 and November 3, only the seventh weekly sale above 6 billion dollars in five years. About 4.9 billion dollars of that, roughly three quarters, was long liquidation, with new short positions playing a supporting role. Managed money net length in Brent had rebuilt to about 28 billion dollars at one point in October and was down to about 19 billion dollars by November 4, against more than 45 billion dollars at the peak of the war premium in April.
The timing matters. The positioning window closed on Tuesday, November 3, before Brent fell 8.7 percent on Wednesday, November 4 to settle at 94.62 dollars a barrel, with WTI down 8.3 percent to 88.12 dollars, after the Democratic sweep of Congress fed a narrative that the administration’s room for military operations would narrow. Open interest fell by 2.7 billion dollars that day. Funds were already leaving before the fall, and the fall itself is not in these numbers.
Trend followers were caught in the same turn. Goldman Sachs’ systematic strategies team described a major trend break in early November, with bonds rising, equities falling and crude sliding at once, and its fixed volatility trend strategy down 5.14 percent month to date through November 5. Short term CTA momentum signals in crude fell below zero for the first time since August, while medium and longer term signals stayed positive but were deteriorating.
By Friday’s close Brent had recovered part of the drop to settle at 98.32 dollars, still down 16.42 percent on the site market tables’ weekly measure, and Quinn noted call buying returning in Brent options over November 5 and 6 as implied volatility rose. UBS analyst Dominic Ellis warned that fundamentals still provide support, pointing to a global destocking trend of nearly 700 million barrels that does not reverse because Congress changed hands. The next positioning release, due Friday, captures the election day collapse and will show whether the exit became a rout.