How Oil Tends to React After Large Speculators Jump Ship

These speculators appear to pull back when oil is hot

Senior Quantitative Analyst
Aug 25, 2021 at 8:00 AM
    facebook X logo linkedin

    Oil has been a hot commodity over the past year, gaining over 50% since last August. Large speculators, however, might be unloading some positions. That is what the Commitment of Traders (CoT) data put out by the Commodity Futures Trading Commission (CFTC) shows. The CoT data aggregates the number of long positions and short positions held by futures traders. You can see in the chart below the net position of the large speculators (that’s the difference in the number of long and short positions) has fallen significantly over the past few weeks. This week, I’m looking to the past to see how the oil market has tended to react after these occurrences. 

    IotW Chart 1 0824

    Large Speculators Pull Back When Oil is Hot 

    It looks like the large speculators are taking some profits, as oil recently hit a 52-week high. I want to look at similar times in the past. With weekly CoT data, I looked at times in which the net position held by large speculators was at a 52-week high in the past three months but then fell by at least 20%. Also, oil had to hit a 52-week high in the past three months. There were eight prior occurrences and I summarize oil returns after these times in the table below. Looking at the numbers, the large speculators have not been great at timing their exits. A year after these occurrences, oil gained an average of about 30%, with six of the eight returns positive. At every time frame below, the average return and percent positive beats the typical metrics since 1999 (the year of the first signal).

    IotW Chart 2 0824

    For those curious, the table below shows the individual returns. Since the financial crisis in 2008-2009, there have been three signals. Oil lost over 8% in the next three months after two of those signals, including the most recent signal in 2017. However, oil was positive by almost 35% a year later after that time.

    IotW Chart 3 0824




    Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

    This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

    On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

    Start targeting gains like the ones our subscribers have seen recently, including:

    213.3% GAIN on AutoNation calls
    100.0% GAIN on Monster Beverage calls
    100.4% GAIN on Walgreens Boots Alliance puts
    100.4% GAIN on ON Semiconductor calls
    257.7% GAIN on Dell calls

    101.0% GAIN on Apollo Global Management calls
    103.6% GAIN on JP Morgan  Chase calls
    105.3% GAIN on DraftKings calls
    101.3% GAIN on Airbnb calls
    203.0% GAIN on Shopify calls
    102.0% GAIN on Cboe Global Markets calls
    100.9% GAIN on Boeing calls
    102.1% GAIN on Microsoft puts
    102.3% GAIN on First Solar calls
    101.5% GAIN on PulteGroup calls
    101.0% GAIN on Apple calls
    209.4% GAIN on NXP Semiconductors calls
    100.8% GAIN on Uber Technologies calls
    100.4% GAIN on Academy Sports and Outdoors puts
    102.2% GAIN on Trade Desk calls
    100.8% GAIN on DoorDash calls
    100.0% GAIN on Camping World Holdings puts
    100.0% GAIN on Cboe Global Markets calls
    100.2% GAIN on calls
    238.5% GAIN on Oracle calls



    Rainmaker Ads CGI