Oil: net position has crawled back from the brink, but risks remain

Based on the CFTC's COT (Commitments of Traders) reports for the week ending on the previous Tuesday:

The number of large speculators (NON-COMMERCIAL) who bought oil contracts increased by 6 thousand contracts, reaching a total of 169.7 thousand. This was a significant increase after a previous decrease in the weekly net position. The net position had been at its lowest levels since 2013 before starting to rise again.

Commercial hedgers raised their net position for selling oil contracts by 2.4 thousand contracts, reaching a total of 184.6 thousand. Hedger operators also saw a slight increase in their net position for selling oil contracts, following a significant decrease in the previous week.

The number of open contracts rose by 11 thousand, reaching a total of 1.598 million.

The optimistic measure of major investors (the proportion of buy contracts to sell contracts) rose by 0.14 to reach 2.06 during the week.

The latest COT oil data indicates a surge in bullish sentiment as traders cautiously raised their net position following a significant decrease the previous week. Additionally, the net position has started to increase from near-record low levels since 2013. If this trend continues, it could potentially lead to a rise in oil prices.

Simultaneously, significant investors refrained from initiating new purchases and instead decreased their existing positions. To confirm the shift in the overall position, it would be advisable to await the information from the upcoming weekly report.

WTI

The data from COT reports is essential and is primarily utilized for trading over a medium to long period. Large speculators, such as banks and investment funds, typically follow the trend indicated by the blue line. Small speculators, known as nonreportable positions, have minimal impact on the market, as shown by the red line. Hedgers, including operators and large companies, usually trade against the trend, represented by the black line. The net position is determined by the difference between the number of buy and sell contracts. Open interest is the total of all open positions in the market.