Oil: Net position hampers growth despite war in Middle East

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

For the third week in a row, large speculators (NON-COMMERCIAL) decreased their net position on the purchase of oil contracts, bringing it down to 306.4 thousand contracts, a decrease of 15.6 thousand contracts. This is the lowest net position since March 8, 2022, and marks a reversal of the 13-week streak of increasing net positions.

Operator hedgers decreased their net position for the sale of oil contracts by 22.5 thousand contracts, bringing it down to 340.6 thousand. This marks the second week of decreased net position after 14 consecutive weeks of increases.

The open interest decreased by 99,000 contracts, bringing the total to 1,654,000.

The ratio of the number of contracts to buy to the number of contracts to sell for the bullish index of large speculators rose by 0.18 to 4.72 this week, due to a decrease in sales.

Data from the COT report indicates a growing bearish sentiment among traders. For several weeks, traders have been cutting back on their already large net position as prices rise. Last week, they only reduced their purchases and sales, without opening any new ones. This has caused the net position to drop from its highest levels in the past 19 months. If this trend continues, it could impede the growth of oil prices, even with the recent escalation of tensions in the Middle East.

WTI

COT reporting data is essential for medium to long term trading. Large speculators, NON-COMMERCIAL (banks, investment funds) usually trade in line with the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, generally do not have a major impact on the market (red line). Hedgers, COMMERCIAL (operators, large companies) usually trade 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.