Editor's Note: Below is a brief excerpt from today's Early Look written by Head of Sales and Research Daryl Jones. Click here to learn more about the Early Look.
Trend following is prevalent in crude. CFTC net futures and options positioning bottomed in June right in line with crude oil prices and has since moved +127K longer on the margin over the last 3 months to net long +505K contracts. The all-time high in contract positioning came back in February at Reflation’s Peak (net long +586K)
So admittedly, it’s not totally a contrarian call to be sniffing around oil on the long side, but if oil does confirms a bullish to bearish transition, rest assured there is going to be a lot of capital chasing it. At down roughly -14% on the year, there are only two major asset classes performing worse . . . natural gas at down -32% and coffee at down -17%. (Incidentally, in aggregate oil equities have performed worse than the commodity!)
