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Full Picture: Fundamental Indicators for Oil Traders This Week

PART:
1 2 3 4 5 6 7 8
Part 7
Full Picture: Fundamental Indicators for Oil Traders This Week PART 7 OF 8

Hedge Funds’ Net Long Positions in US Crude Oil Contracts Rose

Hedge funds 

On September 30, 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 ten weeks in the week ending September 27, 2016.

Hedge Funds’ Net Long Positions in US Crude Oil Contracts Rose

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The net long positions rose by 33,985 contracts to 181,452 contracts for the week ending September 27, 2016—compared to the previous week. Crude oil prices rose 4.3% in the last week—compared to the previous week. For more on crude oil prices, read Part 1 in this series.

The net long positions in WTI (West Texas Intermediate) crude oil futures and options contracts hit an eight-month low of 86,817 contracts in the week ending August 2, 2016. The net long positions in WTI contracts hit the highest level since May 12, 2015, of 249,123 contracts in the week ending April 26, 2016.

Commercial and non-commercial traders 

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

Open interest for WTI crude oil futures and options contracts rose for the third time in the last six weeks in the week ending September 27, 2016. They rose by 51,925 contracts to 2,569,305 contracts from September 20–27, 2016. The open interest for WTI crude oil futures and options contracts hit an all-time high of just over 2.7 million contracts in the week ending February 9, 2016.

Impact on energy stocks and ETFs 

Hedge funds’ bullishness or bearishness can impact crude oil prices. In turn, this can impact oil and gas producers’ revenues such as QEP Resources (QEP), SM Energy (SM), and W&T Offshore (WTI).

Energy prices also impact ETFs such as the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the PowerShares DWA Energy Momentum ETF (PXI), 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 ETF (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.

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