Mapping of price and investors' WTI net length spotlights SND cross currents
July 29, 2024
Key Observations:
In the NYM WTI crude oil market, institutional investors were net long 239,237 contracts of futures & options as of July 23, according to CFTC Commitment of Traders data released on Friday.
This net position marks a reduction of 24,312 contracts (-9.2%) from the week before but an increase of 47,133 contracts (+24.5%) from the same week a year ago.
At Jul 23 NYM CL1 closing price, long-side risk collectively held by institutional investors tallies to approx. $60.9 Bn. Collective short-side risk tallies to approx. $42.5 Bn, for gross risk of $103.4 Bn.
Despite the increase in quantity of contracts held by institutional investors versus a year ago, value at risk remains roughly comparable given relative prices. At the NYM CL1 closing price on July 25, 2023, this risk tallied to $59.1 Bn on the long side, $43.8 Bn on the short side, and $102.9 Bn gross. Net risk increased from $15.3 Bn to $18.4 Bn (+20%) since a year ago.
Last week’s average price for CL1 ($77.95) is low relative to investor positioning in the pricing regime that began in 2020 (orange observations in chart). However, it is tracking in between the “High Costs” regime of 2006-2014 and the “Shale Unbound” regime of 2014-2020. Current regime overlaps each prior regime at various points in the past four years. The current market is acknowledging: (a) high drilling costs that are easing on the margin (for now), and (b) softer sequential demand (that may soon reverse) and substantial idled OPEC+ field capacity (that may not be tapped).
Source: CFTC, NYM, Bloomberg, Blacklight Research. Note: SND = supply and demand.
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