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US-Iran Deal Hopes Trigger Broad CTA Selling Across Oil Markets, Kpler Says

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Expectations for progress in US-Iran negotiations sparked broad selling across oil markets, with Commodity Trading Advisor activity adding further pressure to crude and refined-product time spreads, Kpler said Friday.

As optimism around negotiations grew on May 21, traders sold oil futures and spreads across multiple markets, pushing prices and market structures lower.

In Brent, one Trend CTA strategy reduced its bullish position for the first time since April 30, selling about 8,917 lots and lowering its exposure from 100% long to 91% long.

Kpler said further price declines could push that strategy into a short position if Brent falls to about $99.49 per barrel. Reversion CTAs had already increased bearish bets from 71% short to 86% short on May 20.

After Brent M1/M2 backwardation narrowed by over $0.50/bbl and fell below $3.58/bbl, CTA strategies sold another 11,530 lots, adding to weakness in the spread, Kpler said.

Selling had already emerged on May 20 with about 1,153 lots sold, leaving Brent M1/M2 positioning only 12.5% long, the lowest level since April 27, while traders also sold roughly 624 lots in the quarterly Brent spread.

WTI avoided Trend CTA selling while Reversion CTAs reduced bearish positions from 71% short to 43% short, with strong exports and tighter US crude supplies continuing to support fundamentals, Kpler said.

Even with those supportive fundamentals, WTI spreads weakened as traders sold about 417 lots in M1/M3 and 324 lots in M2/M3, according to Kpler.

In gasoline markets, Trend CTAs reduced exposure after remaining fully long since April 27, selling about 1,424 RBOB lots while five strategies liquidated a combined 3,580 lots in the M1/M2 spread.

Diesel markets also faced selling pressure as traders sold about 936 lots in ULSD M2/M3 and roughly 1,696 lots in Gasoil M2/M3 after that spread fell below $41.25 per metric ton, Kpler said.

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