Oil futures rose further in August, with ICE Brent gaining 5.5% and averaging above the $50/b mark, supported greatly by a decline in US crude oil stockpiles, somewhat lower supplies and healthy refined product market sentiments. Crude futures prices climbed earlier in the month on US dollar weakness and momentum toward oil market rebalancing. Geopolitical developments also supported gains to two-month highs. Prices advanced further with surging US fuel demand and strong refinery runs. US gasoline demand was at 9.842 mb/d for the week ending 28 July, the highest on record. Before the end of first decade of the month, crude oil futures prices continued increase further after a strong US jobs report bolstered hopes for growing energy demand. Subsequently, oil prices started to fall amid concerns over global oversupply of crude. During the same week, the biggest weekly draw in US crude stocks since September 2016 could not prevent a slide in oil futures, as a surprise build in gasoline inventories and a continuing rise in US output dictated market reaction. Before long, prices rebounded sharply as the dollar fell, US drillers cut rigs and refined product futures led the oil complex higher after Energy Information Administration (EIA) data showed a gasoline stock draw, while traders continued to track a potential hurricane in the Gulf of Mexico. However, gains were limited amid the reopening of Libya's largest oil field.
By the end of the month, prices fell again as Hurricane Harvey threatened oil operations along the energy hub on the USGC. US gasoline futures temporarily spiked as severe flooding disrupted refineries and energy infrastructure. In contrast, crude prices dipped on expectations for reduced refinery demand. However, prices normalized quickly with the return to the market of disrupted facilities.
ICE Brent ended August $2.72, or 5.5% higher, to stand at $51.87/b on a monthly average basis, while the NYMEX WTI increased by $1.38, or 3.0%, to $48.06/b. Y-t-d, ICE Brent is $9.49, or 22.2% higher at $52.14/b, while the NYMEX WTI rose by $8.24, or 20.1%, to $49.30/b.
Crude oil futures prices improved in the second week of September. On 11 September, ICE Brent stood at $53.84/b and NYMEX WTI at $48.07/b.
As WTI futures rose during the 1st week in August, touching over $50/b for the first time since May, hedge funds and other money managers raised their net long WTI crude futures and options positions, according to CFTC data. Hedge funds raised combined futures and options positions by 43,861 contracts to 282,362 lots during the period. The level was the highest seen since mid-April. Hedge funds and other money managers also raised their net long positions in futures and options contracts in Brent futures by 53,777 contracts to 342,348 lots during the same period.
Subsequently, hedge funds and money managers trimmed their bullish bets on WTI crude futures and options positions for the third straight week. During the week of 29 August, the speculator group cut its futures and options net long positions by 105,671 lots to 147,303 contracts, the highest amount in about a month, the CFTC said. Money managers also slightly reduced Brent futures and options contract net lengths by 1,296 lots to reach 416,551 contracts during the same week. This continued strength in Brent futures and options net lengths is likely connected to a sudden tightening of inter-month spreads, which saw Brent move from contango into backwardation between October and December. More generally, Brent inter-month spreads have tightened much more than WTI’s since the last week of July, which has made Brent more profitable for hedge fund managers with long positions. Total futures and options open interest volume in the two exchanges was down at 5.66 million contracts.
The daily average traded volume for NYMEX WTI contracts increased further by 128,898 lots, or 9.3%, to 1,509,803 contracts, while that of ICE Brent was 89,643 contracts higher, up by 10.5% at 941,999 lots. Daily aggregate traded volume for both crude oil futures markets increased by 218,541 contracts to 2.45 million futures contracts. In August, total traded volume for NYMEX WTI and ICE Brent futures were higher at 34.73 and 21.67 million contracts, respectively.