Oil: Will the Bears Win?

The Commodity Futures Trading Commission (CFTC) COT (Commitments of Traders) reports for the week ending on Tuesday last week showed:

For the second week in a row, large speculators (NON-COMMERCIAL) decreased their net buy position on oil contracts by 7.7 thousand contracts, bringing it down to 234.4 thousand. This marks a decrease from the highest levels seen since November 15, 2022, when the net position had been steadily increasing for six weeks.

Hedgers (COMMERCIAL) decreased their net sell position on oil contracts by 13.8 thousand contracts to 256.3 thousand. This marks the second consecutive week that hedger operators have reduced their net sell position.

The open interest decreased by 79,000 contracts, bringing the total to 1.623 million.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators decreased by 0.05 over the week, bringing it to 2.83.

The COT oil data suggests a growing bearish sentiment among traders. For the second week in a row, they have been reducing their net position on rising prices. This has caused the net position to drop from its highest levels in the last 9 months. Large funds have decreased their purchases by 2% for the week. If this trend continues, it could lead to a decrease in oil prices.

The data from the previous report may be skewed due to the monthly expiration of futures. Therefore, the data from the upcoming report, to be released in a week, will be more indicative.

WTI

COT report data is essential for medium and long-term trading, and is mainly used by large speculators, NON-COMMERCIAL (banks, investment funds). These traders usually follow the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, however, have little influence 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, while open interest is the total of all open positions in the market.