On May 20, 2016, the CFTC (U.S. Commodity Futures Trading Commission) released its weekly Commitments of Traders report. It reported that open interest for WTI (West Texas Intermediate) crude oil futures and options contracts fell for the second consecutive week. Open interest fell by 160,339 contracts to 2,401,542 from May 10–17, 2016. WTI crude oil futures and options contracts open interest is close to the January 19, 2016, low of 2,400,004 contracts. In contrast, open interest peaked at 2,717,026 contracts for the week ended February 9, 2016.
Commercial and non-commercial traders
The CFTC divides traders into two categories: commercial and non-commercial. Hedge funds are non-commercial traders. Oil producers and consumers are commercial traders. Commercial traders use the futures and options markets for hedging activity to offset crude oil price volatility.
The CFTC added that hedge funds increased their net long positions for the first time in the last three weeks for the week ended May 17, 2016. Net long positions increased by 30,475 contracts to 246,996 contracts from May 10–17, 2016. They hit the highest level since May 12, 2015, of 249,123 for the week ended April 26, 2016.
Impact on energy companies and ETFs
The ups and downs in crude oil prices affect oil and gas exploration and production companies such as Warren Resources (WRES), Comstock Resources (CRK), and Northern Oil & Gas (NOG). They also affect ETFs and ETNs such as the PowerShares DWA Energy Momentum ETF (PXI), the Direxion Daily Energy Bear 3x ETF (ERY), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
In the next part of this series, we’ll look at the latest crude oil price forecast.