On February 19, 2016, the CFTC (U.S. Commodity Futures Trading Commission) released its weekly Commitment of Traders report. It reported that US crude oil futures contracts’ open interest is close to record highs. The open interest was at 1,840,051 contracts for the week ending February 16, 2016, compared to 1,854,379 for the previous week. The open interest peaked at 1,855,603 in January 2016 ahead of the new crude oil production alliance covered in the first part of the series.
Commercial and non-commercial traders
The CFTC divides traders into two categories—commercial and non-commercial traders. Hedge funds and speculators are non-commercial traders. Oil producers are commercial traders. Commercial traders use the futures and options markets for hedging activity to offset lower crude oil prices.
The CFTC report added that hedge funds and oil speculators reduced their bullish positions for the third consecutive week for the week ending February 16, 2016. Hedge funds reduced their long positions by 26,860 contracts for the same period. On the other hand, hedge funds increased their short positions by 2,030 contracts for the same period. The net positions held with hedge funds and speculators were at 158,987 contracts for the week ending February 16, 2016. Hedge funds are still bearish on the crude oil market. The consensus of excess supplies in 2016 due to record inventory will continue to put pressure on oil prices.
Commercial crude oil traders reduced their short positions by 31,891 to 168,995 contracts for the week ending February 16, 2016. The volatility in the oil prices impacts oil and gas producers like Statoil ASA (STO), CONSOL Energy (CNX), and Marathon Oil (MRO). It also influences refiners like Western Refining (WNR), Alon USA Partners (ALDW), and Northern Tier Energy (NTI).
ETFs and ETNs like the United States Oil Fund (USO), the iShares U.S. Oil Equipment & Services ETF (IEZ), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the Vanguard Energy ETF (VDE) are also influenced by the ups and downs in crude oil prices.
Read the next part of the series to learn more about the US crude oil rig count report.