WTI net longs at record level

It was a tale of two contracts last week as speculators took opposite positions on WTI and Brent. Managed money longs in WTI expanded more than 15k contracts as investors grow more confident about oil prices staying steady and have also been focussing on potential changes to US corporate taxes that could see WTI shoot up relative to Brent, most likely to a premium. Whether the border adjustment tax indeed comes to pass is hard to call at this point as it would almost certainly result in higher domestic fuel prices in the US, never a popular political position. Net length in WTI is at record levels which to our mind leaves plenty of downside risk if either the tax changes fail to materialise or OPEC fails to deliver fully on its production cuts.

In the Brent market, investors are taking a more cautious stance on OPEC's output, cutting long positions by 13k contracts but not adding substantially to short positions. OPEC's production assessment will be published on February 13th, giving the market several more weeks of grappling in the dark on output levels. 

Click here to download the full publication