28 Jun

Hedge Funds’ Net Long Positions Rose for the First Time in 5 Weeks

WRITTEN BY Gordon Kristopher FEATURED IN Macroeconomic Analysis

Hedge funds 

On June 24, 2016, the CFTC (U.S. Commodity Futures Trading Commission) released its weekly Commitments of Traders report. It reported that hedge funds increased their net long positions on WTI (West Texas Intermediate) crude oil futures and options contracts for the first time in the last five weeks for the week ended June 21, 2016.

Net long positions rose by 21,586 contracts to 213,075 contracts for the week ended June 21, 2016, compared to the previous week. They hit their highest level since May 12, 2015 at 249,123 contracts in the week ended April 26, 2016.

Hedge Funds’ Net Long Positions Rose for the First Time in 5 Weeks

Commercial and non-commercial traders 

The CFTC divides traders into two categories—commercial and non-commercial. Oil producers and consumers are commercial traders. Hedge funds are non-commercial traders.

Commercial traders use the futures and options markets for hedging activity to offset crude oil price volatility.

Open interest

Open interest for WTI crude oil futures and options contracts fell for the first time in the last four weeks. They fell by 108,833 contracts to 2,461,218 contracts for the week ended June 21, 2016, compared to the previous week.

The US crude oil futures and options contracts’ open interest peaked at 2,717,026 contracts for the week ended February 9, 2016.

Impact on energy stocks and ETFs 

The uncertainty in crude oil prices can impact oil and gas producers like PDC Energy (PDCE), Memorial Resource Development (MRD), and Northern Oil & Gas (NOG). It also impacts industry-related funds such as the PowerShares DWA Energy Momentum ETF (PXI) and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

In the final part of this series, we’ll take a look at some crude oil price forecasts.

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