Hedge Funds Are Bullish on US Crude Oil ahead of OPEC Meeting
On October 21, 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 in WTI (West Texas Intermediate) crude oil futures and options contracts for the fifth time in the last six weeks in the week ended October 18, 2016.
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Net long positions rose by 3,511 contracts to 291,453 contracts for the week ended October 18, 2016, compared to the previous week. It was the highest level since May 12, 2015. Crude oil prices rose 0.90% in the last week compared to the previous week.
For more on crude oil prices, read Part 1 and Part 3 of this series. Hedge funds are bullish in US crude contracts ahead of the OPEC (Organization of the Petroleum Exporting Countries) meeting. For more on this meeting, read Part 4 of this series.
Commercial and noncommercial traders
The CFTC divides traders into two categories: commercial and noncommercial. Hedge funds are noncommercial traders, while oil producers and consumers are commercial traders. Commercial traders use the futures and options markets for hedging activity to offset crude oil price volatility.
Open interest for WTI crude oil futures and options contracts fell for the third time in the last five weeks in the week ended October 18, 2016. It rose 171,472 to 2,596,994 contracts from October 11–18, 2016. Open interest for WTI crude oil futures peaked at 2,768,466 contracts in the week ended October 11, 2016.
Impact on energy stocks and ETFs
Crude oil prices also impact ETFs such as the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the PowerShares DB Crude Oil Double Short ETN (DTO), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the ProShares Ultra Bloomberg Crude Oil (UCO), and the Vanguard Energy ETF (VDE).
In the last part of this series, we’ll take a look at some crude oil price forecasts.