Hedge funds are piling back into American crude oil markets at the fastest weekly rate since March, as simultaneous disruptions across three of the world's most critical energy chokepoints spark a rush for supply. According to the latest data from the Commodity Futures Trading Commission (CFTC), money managers boosted their net long positions in WTI crude oil futures and options by 21,402 contracts in the week ending July 28, bringing the total to 108,307 contracts. This marks the largest single-week increase in nearly four months. Bullish sentiment toward WTI crude among speculators has now climbed to its highest level since mid-June. At the same time, net long positions in US gasoline rose to a four-month high, while diesel bullish bets hit their highest in nearly five months.
Over the past few weeks, hedge fund positioning in WTI crude has undergone a dramatic shift from hesitation to conviction. As recently as July 7, net longs had fallen by 19,507 contracts to just 65,681—marking a third consecutive week of declines. But as the US-Iran conflict escalated and the Strait of Hormuz was effectively closed again, speculative capital reversed course. By July 14, net longs had rebounded by 11,704 contracts to 86,383. The pace of buying then accelerated sharply, with net longs edging up by a mere 0.6% to 86,905 contracts in the week ending July 21 before exploding higher by 21,402 contracts in the final week of July—the fastest weekly pace since March.
In stark contrast to the frenzy around WTI crude, speculative bullish bets on Brent crude remained largely subdued, with net longs slipping by just 6,948 contracts to 185,083. This divergence clearly indicates that, with multiple global supply routes simultaneously obstructed, US crude is being viewed as the most reliable "last supply buffer" for international markets.
The triple supply shock: a perfect storm for oil markets
The aggressive hedge fund buying is rooted in a supply crisis unfolding simultaneously across three major geographic regions. The first shock centers on the Strait of Hormuz, the world's most critical oil chokepoint. After the US-Iran war erupted in late February, the strait—through which about one-fifth of global oil and liquefied natural gas trade flows—was essentially closed. A temporary ceasefire in mid-June allowed shipping to resume slowly, but by July 12 the truce was considered "effectively void," the strait was again largely sealed off, and tanker traffic came to a near standstill.
The second shock is in the Bab el-Mandeb Strait at the southern entrance to the Red Sea. After the Strait of Hormuz closed, Saudi Arabia diverted the vast majority of its crude exports to the Red Sea port of Yanbu, with volumes surging from roughly 970,000 barrels per day a year ago to over 4.5 million barrels per day. However, on July 20, Iran-backed Houthi rebels in Yemen declared a "maritime blockade" against Saudi Arabia and subsequently struck two Saudi tankers in the Red Sea with missiles and drones. If the Bab el-Mandeb Strait is fully blocked, it would strangle most of Saudi Arabia's oil exports and cut global supply by an additional 7% or so.
The third shock is in the Black Sea, where Kazakhstan's oil lifeline has been severed by drone attacks. Between July 17 and 20, four tankers loading oil at the Caspian Pipeline Consortium (CPC) terminal were struck by Ukrainian drones. The CPC terminal is the primary export route for most of Kazakhstan's oil, and the attacks forced a suspension of loading operations, prompting Kazakhstan to slash its oil production from 2.07 million barrels per day to 1.63 million. Worryingly, this may only be the beginning. Reports indicate that global oil markets are simultaneously experiencing a "five-fold shock"—in addition to the three supply lines above, sustained Ukrainian drone strikes on Russian refineries have driven Russian crude processing to its lowest level in 21 years, prompting Moscow to effectively ban diesel exports. Meanwhile, the US itself is rapidly depleting its own Strategic Petroleum Reserve due to heavy exports.
US crude: the world's final supply buffer
Amid this multi-pronged supply crisis, US crude is emerging as the "last straw" that global buyers are scrambling to secure. Although US crude exports are already at historically high levels, traders expect volumes to climb further as foreign buyers seek to compensate for disruptions elsewhere. The appeal of American crude lies in its "geographic immunity" from the geopolitical risks affecting the Strait of Hormuz, Bab el-Mandeb Strait, and the Black Sea—when the world's three major transport chokepoints are all blocked simultaneously, crude from the Gulf of Mexico becomes one of the few incremental supply sources still able to flow freely to international markets.
However, this safety buffer is not limitless. The US Strategic Petroleum Reserve has been rapidly drawn down over the past few months due to heavy exports, and while domestic shale producers have some capacity to ramp up output at elevated oil prices, they are unlikely to fully plug a global supply gap of millions of barrels per day in the near term. The tightness is also flashing in refined product markets. CFTC data shows speculators have pushed net long positions in US gasoline to their highest in four months, while pure long bets on diesel have hit a near five-month peak. This suggests the market is not just betting on higher crude prices, but also on further expansion of refining margins—when global refining capacity tightens due to outages in Russia, Saudi Arabia, and elsewhere, refined products could become the next flashpoint for price surges.
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