Oil: hedgers warning bulls?

The Commodity Futures Trading Commission (CFTC) reported, for the week ending last Tuesday, that the Commitments of Traders (COT) reports showed.

For the fourth week in a row, large speculators (NON-COMMERCIAL) decreased their net position on the purchase of oil contracts, bringing it down to 300.8 thousand contracts, a decrease of 5.6 thousand contracts. This marks a continuation of the downward trend that began on March 8, 2022, when the net position hit its highest point since September 5.

Operator hedgers slightly increased their net selling position of oil contracts by 0.4 thousand, bringing the total to 341 thousand after a two-week reduction.

The number of open contracts decreased by 26 thousand, bringing the total to 1.628 million.

The ratio of the number of contracts to buy to the number of contracts to sell for the bullish index of large speculators decreased from 4.72 to 4.14 over the week, a decrease of 0.58.

Data from the COT report indicates that large speculators are becoming increasingly bearish on oil prices. Over the past month and a half, large funds have been reducing their net position on price increases from the highs of more than a year and a half ago, and the net position has reached its lowest levels in the same period. In the last week alone, large speculators increased their sales by 16%. If this trend continues, it could lead to a decrease in oil prices.

Large speculators began buying, with some expecting prices to increase.

Hedgers who trade for the long-term are feeling more optimistic about oil. They have ceased to reduce their net position as prices have risen, and have even slightly increased it. If large speculators join them in the coming week, it could lead to an upswing in oil prices.

WTI

COT reporting data is essential for medium to long term trading. Large speculators, NON-COMMERCIAL (banks, investment funds), usually follow the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, usually have little impact on the market (red line). Hedgers, COMMERCIAL (operators, large companies), usually go against the trend (black line). The net position is the difference between the number of buy and sell contracts. Open interest is the total of all open positions in the market.