24 Jul

WTI Oil: Are Hedge Funds Cutting Risk?

WRITTEN BY Gordon Kristopher

Hedge funds 

Hedge funds’ net bullish positions in WTI oil futures and options decreased 7.4% to 401,690 from July 10 to July 17. These positions were near their lowest level since June 26. The drop in hedge funds’ net bullish positions may be due to the potential downside for oil prices. However, hedge funds positions increased by 186,202 contracts (86.0%) from a year ago.

The US CFTC released the latest positions data on July 20. August WTI crude oil futures rose ~1.4% on the same day. However, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 0.4% on July 20. XOP seeks to follow the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

Halcon Resources (HK), Concho Resources (CXO), Jagged Peak Energy (JAG), and Chesapeake Energy (CHK) fell 3.3%, 2.7%, 2.6%, and 2.56%, respectively, on July 20. These stocks were among the top percentage underperformers in XOP’s portfolio during this period. These stocks account for 5.6% of XOP’s holdings.

WTI Oil: Are Hedge Funds Cutting Risk?

Hedge funds record high positions

Hedge funds’ net bullish positions in WTI crude oil futures and options hit a record high of 495,975 for the week ended January 30. Since then, the net long positions have dropped 19.0%. However, WTI oil prices have risen ~5.3% from January 30 to July 23.

Active WTI crude oil prices hit $75.27 per barrel on July 3, recording the highest intraday level since November 2014. Active WTI oil futures have dropped ~10.0% since July 3. Please refer to Part 2 of this series to learn more about the bearish drivers for oil.

Open interest 

WTI oil futures contracts’ open interest decreased 6.4% to 3,217,979 from July 10 to July 17. However, open interest increased 15.5% from a year ago. Open interest hit a record high of 3,785,409 for the week ended May 15 and has decreased 15.0% since then.

Next, we’ll cover the US natural gas rigs.

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