Many professionals within the energy industry consider to have the makeup of one part meteorologist, two parts analyst, and three parts economic theorist with a dash of psychic reader. Even though trading decisions have been made based off moon cycles and a deck of cards from the 15th century for divination, we can only try and foresee what’s in the cards in the near term: seasonal supply and demand, and market participation. With demand forecasts from OPEC and IEA continuing to improve sentiment in the market and hurricane season in full-swing with supply disruptions, we look to the CFTC (Commodities Futures Trading Commission) for some other clues of conviction in the markets or lack thereof. In the week to September 12th, ICE data showed speculators raising their net long positions in Brent futures and options by 16,962 contracts to 430,699, the highest level since March of this year. This increase was the first in 4 weeks. Hedge funds and other money managers cut their bullish bets on U.S. crude futures and options by 5,435 contracts to 180,985 during that period. In the previous week, speculators raised their crude oil net longs. Hedge funds and other money managers continued their bullish bets on RBOB futures by increasing their net long positions by 2,926 to 68,605. The highest level since May of 2014. Hedge funds also lifted their net longs in HO to the highest levels since February of 2013. Below is a chart of WTI Crude Oil COT (Commitment of Traders) Summary:
As of 12:45 pm EST, WTI for October delivery is down $0.18 to $49.71, RBOB is up $0.0083 at $1.67, and HO is down $0.0213 at $1.7775. With rig counts at their lowest levels since June and Hurricane Maria heading towards the Caribbean, and potentially towards the gulf, we as students of the markets try and scan the cards that have been gently laid across the dimly lit table and decipher if they are showing a post-hurricane bet on fuel shortages that risks becoming an overcrowded trade with a sharp price reversal when portfolio managers decide to take some profits and exit or, will demand coupled with another month and a half of hurricane season keep a bid on the energy sector? Until that final card is slowly turned over, we must wait and see.