US Commodity Futures Trading Commission data showed net long positions in oil, held by non-commercial traders, fell to 110.5k in the latest reporting period. That compared with 114.6k previously, indicating reduced bullish positioning in the market.
The weekly change implies a decline of 4.1k contracts from the prior level. The latest figures reflect the CFTC’s positioning data for oil non-commercials and provide a snapshot of speculative sentiment during the period covered.
Speculative Positioning and Macro Headwinds
We’ve noted that net long positions for non-commercial traders have declined to 110.5k contracts. This shift indicates that large speculators are reducing their bullish bets on crude oil. This is a signal for us to adopt a more cautious, if not bearish, stance in the immediate term.
This sentiment aligns with recent macroeconomic data. Last week’s manufacturing PMI figures from China came in at 49.7, pointing to a contraction and fueling concerns over weakening demand from the world’s largest oil importer. This follows a trend of softer-than-expected industrial output over the past quarter.
Supply Builds, Trading Strategies, And Dollar Strength
On the supply side, the latest EIA report showed a surprise build in U.S. crude inventories of 2.1 million barrels, against market expectations of a draw. Historically, consecutive inventory builds during the summer driving season, as we saw in July of 2024, often precede a price correction. This suggests that near-term supply is more than adequate to meet current demand.
Given this context, we see an opportunity in positioning for potential downside or range-bound trading. We are considering buying put options or establishing bear put spreads on WTI futures for the August and September contracts. These strategies offer defined risk while allowing us to profit from a potential dip towards the low $70s.
A strengthening U.S. dollar is also creating headwinds for crude prices. The Federal Reserve’s commentary last week was interpreted as hawkish, boosting the dollar index to a three-month high of 106.50. A strong dollar makes oil more expensive for holders of other currencies, which can dampen global demand.
