Vincent Wu
Research Associate, Flux
Bulls Cash Out
Speculators trim length ahead of Trump ultimatum; open interest declines across refined product futures, WTI speculators risk-on
Speculative longs had de-risked slightly ahead of Trump's deadline for Iran to re-open the Strait of Hormuz. Long positions were overcrowded, and the two-week ceasefire likely provided a liquidity event for longs to exit.
- In the week ending 07 Apr, money managers trimmed their length in ICE Brent futures by 1.66%, or 7.2mb. This marks a reversal from previous weeks, where long positions rose for four consecutive weeks. Nonetheless, outright long positions (425mb) are still around the highest levels seen this decade so far. Changes in short positioning were negligible, seeing a 0.3% rise w/w. The long:short ratio sits at 8.42:1.00, the 87th percentile for all weeks since 2013.
- Money managers were fairly risk-on in WTI futures over the week, increasing both long and short positions by 5% and 3.5%, respectively. Nonetheless, overall positioning remains bearish from a historical standpoint, with the long:short percentile at the 20th percentile for all weeks since 2013. Notably, short swap positions declined for the first week since January. Outright short swaps have risen by 60% in the year-to-date, with producers locking in elevated prices.
- Speculative longs had de-risked slightly ahead of Trump's deadline for Iran to re-open the Strait of Hormuz. Long positions were overcrowded, and the two-week ceasefire likely provided a liquidity event for longs to exit. Given the second consecutive week of decline in Brent futures open interest, more players may be on the sidelines amid heightened volatility and fluctuating d/d sentiment, amid Trump's efforts to jawbone the market.
- A risk-off week in ICE gasoil futures, with money managers trimming both long and short positions by 5% and 7% respectively. Since the start of the conflict, long speculative positions have declined in five of the past six weeks, where outright long positions have declined by nearly 30% over this period. While this might be at odds with the record-high prices seen, speculative shorts have declined by 18% since this period, and nearly 50% since the start of the year, which suggests that short covering flows were a significant driver of bullish sentiment.
- In RBOB futures, open interest dropped for a sixth consecutive week, with levels down by over 30% since the start of the conflict. Similarly, it was a risk-off week for money managers, with long and short positions falling by 7% and 12%, respectively. This marks the fifth decline in six weeks for longs.
- Open Interest declined for a seventh consecutive week in ULSD Heating Oil, albeit at a slower pace. Levels are down by 37% since the start of the conflict. While long money managers' positions fell for the sixth week in a row, and for the eighth week in nine, short positions increased after previously declining for six consecutive weeks.
- Open Interest increased in Natural Gas (Henry Hub) for the second consecutive week, rising by nearly 3%, the fastest pace since the week ending 06 Jan. It was a risk-on week for money managers, with long and shorts rising by 5% and 12%, respectively. Short positions are at their highest level since the week ending 20 Jan.
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