ICE Brent and WTI opened the week lower even as supply risks persisted and speculative length stayed elevated. Brent fell about 2% to below $102/bbl, while WTI eased to around $98/bbl. Saudi Aramco warned some European clients it may be unable to allocate crude cargoes next month under long-term contracts because disruptions to the East–West pipeline are limiting flows to Yanbu; the line was damaged in drone attacks last week and may take several weeks to fully restart. European crude markets were described as tighter.
Positioning data continued to point to bullish sentiment. ICE figures show money managers lifted their net long Brent by 16,904 lots over the week to 282,657 lots as of last Tuesday, the largest net long since late May 2026. Refined products also stayed tight as August exports from key Asian suppliers declined: India’s gasoline and diesel exports fell 14.5% and 19.2% year-on-year, respectively, while China’s gasoline exports dropped 57.4% year-on-year. Against this backdrop, the ICE gasoil crack spread rose to about $95/bbl this week from an August average of roughly $74/bbl, keeping Western markets undersupplied.
Crude Oil Trading Strategy and Market Outlook
We believe the recent dip in Brent crude below $102 and WTI to $98 presents a strategic buying opportunity for derivative traders rather than a sign of a long-term trend reversal. While optimism around the upcoming UN General Assembly and high-level diplomatic talks has sparked some short-term profit-taking, the underlying supply risks remain heavily skewed to the upside. Traders should consider using call options to capture potential rebounds as geopolitical tensions continue to threaten global flows.
We recommend maintaining long positions on crude futures because the damaged Saudi East-West pipeline will likely restrict European supplies for several weeks. Disruptions at key export hubs like Yanbu historically lead to prolonged market tightness and sharp price spikes. With Saudi Aramco already warning customers of reduced allocations, the physical market is poised to tighten further heading into October.
Speculative Positioning and Refined Products Strategy
We must also watch the heavily bullish speculative positioning, with money managers holding over 282,000 net long contracts in Brent, the highest level seen since late May 2026. This heavy long positioning means we could see brief, sharp sell-offs if traders rush to lock in profits on any temporary good news. However, the dominant trend remains bullish, making downside protection via put options a smart, low-cost hedge for existing long portfolios.
In the refined products space, we advise traders to focus on long positions in gasoil and diesel derivatives. Asian refinery outages have severely cut fuel exports, with Indian diesel shipments dropping nearly 19% and Chinese gasoline exports plunging more than 57% year-on-year. This global shortage has already pushed the ICE gasoil crack spread up to $95 per barrel from its August average of $74, and we expect this strength to persist as Western markets remain highly undersupplied.
