Skip to main content

Speculators Held Crude Net Short Positions First Time in 17 Months!

In my 7/8 post (Just the beginning?), speculator's futures and options contract positions were examined, it indicated that crude would begin long over due correction. I used speculator's futures contract positions this week to assess the indication of crude oil movement.

US crude futures market had a very significant sentiment change based on this Friday's data from CFTC's release for market close 7/22. For the first time in the last 17+ months, "non-commercial" participants, or speculators held net short crude futures positions at NYMEX (see chart "Crude weekly price and speculator net crude
futures positions"). The net short positions of 3,640 contracts were mainly caused by closing nearly 12,000 long positions and increasing over 14,000 short positions for the week. The total outstanding short positions for speculators stood at over 201,600, the second highest level (the highest level was 203,000, happened two weeks ago on 7/8) since the beginning 2006, the long positions declined to 198,000. Actually, speculators had steadily reduced long positions starting June and increasing the short exposures.

The NYMEX crude futures sent out some warning signs based on the extreme readings on speculator short and long futures contract commitments in later June and early July. The last time speculators held net short position, crude was traded just below $60 on 2/13/07, and prior to that week, speculators changed their heavy long position in the fall 2006 to net short and neutral positions in the next few months. How long will speculators be in the bear camp this time around ? Only time will tell, but it would be highly doubtful that the momentum will turnaround in the short time period considering the excess fear/greed was built into crude prices in the last few months.

One of interesting statistics from this week data was that speculator's "spreading" (both long and short) positions spiked to about 1.2 millions in the last two weeks, all time high according to the available data. This could imply more volatile crude market ahead.
Labels:

Popular posts from this blog

Updated: Will AAPL be $125-150 by July?

In late March, we saw significant bullish bets on AAPL in option markets. In my post " Will AAPL be $125-150 by July ?", we noticed a huge call spread position (10,000 contract) hit the tape on March 25. AAPL was closed at 106 and change, and has rallied more than 35%, which certainly make the owner of this long bull spread position smile proudly. So how much profit we are looking at right now if the investor exits the position today? At this moment, AAPL July 125 call is traded at about $19.50 and July 150 call around $4.20. Ignoring the transaction cost, each contract is worth about $1,530, so the total position is $15,300,000. Remembering that the initial investment was only about $3,950,000, and so net profit would be $11,350,000. The trade almost triples the initial investment just over two months! Not a small feast considering the limited risk profile.
Read more

Speculators Held Highest Net Long S&P Futures

Today's dramatic 1000 point reversal of Dow 30 may be just the capitulation point that market has been looking for in this free fall market. Many other sentiment indicators, such as AAII bull and bear readings, VIX and 52 week high/low also point to the extremes. Underneath this gloomy and Armageddon scenario, one of most significant and interesting piece of data is in the futures market, specifically speculator's reading in this scary market. According to today's data release from CFTC, it looks that speculators have positioned for market (S&P500) turnaround. As this past Tuesday, speculators have built more than 102,000 long S&P500 positions, a highest in last five years. More importantly, the speculators also have reduced the bearish bet, short positions to just about 43,000, a lowest level in two years. Without questions, in the last few weeks, the equity market was the darkest period for the long side, but the end may be in sight at least in the short term. Th...
Read more

Is crude about to go higher?

Since hitting the multi-year low $33.87 measured by front month future contracts trading on ICE on 12/19/08, Western Texas Intermediate ( WTI ) light sweet has been stuck at a trading range between $34 and $48 so far this year. Today front month contract was closed at $33.98, almost exactly the same lowest level occurred two months ago. The most interesting question, intriguing many commodity and equity investors alike, is this the temporary bottom or just the beginning of another leg downward spiral to further unwinding excess bullish positions that had built up prior to the July peak last year . If we examine the current future term structure, we may come out with the conclusions that likely outcome in next few weeks WTI would go higher than lower. Since the term structure shifted from backwardation in late July last year to current contango , the spread between front month and 2 nd month contracts has increased steadily. Today the spread reached highest level, about $8 (see...
Read more