Oil has gained over 50% since last August
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.

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).

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.
