The United States Commodity Futures Trading Commission (CFTC) data shows an increase in net oil positions. The figure rose to 103,000 from the previous 98,700.
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We are seeing non-commercial traders, essentially large speculators, increase their bets that oil prices will rise. The latest data shows net long positions are now at 103,000 contracts, indicating growing bullish sentiment in the market. This move suggests that well-informed market participants anticipate upward pressure on oil in the near future.
This sentiment is likely tied to seasonal demand, as we are heading into the fourth quarter. Forecasts for a colder-than-average winter in both Europe and North America are beginning to circulate, which would boost demand for heating oil. We have seen WTI crude prices already climb over 4% this month to around $85 a barrel in anticipation of this shift.
On the supply side, OPEC+ confirmed last week that it will maintain its current production cuts through the end of 2025. This decision removes a significant amount of oil from the market at a time when demand is expected to increase. This supply discipline is a key factor supporting the bullish outlook from these traders.
The broader economic picture also supports this view, as recent data shows global manufacturing activity is holding up better than expected. For instance, the latest US ISM Manufacturing PMI registered a surprise expansion at 50.9, suggesting resilient industrial demand for energy. This stronger economic footing reduces fears of a demand-destroying recession that concerned us earlier in the year.
We saw a similar buildup in speculative long positions in the autumn of 2023, just before a significant price rally into the winter months. That historical pattern adds weight to the idea that we could be entering another period of price strength. Therefore, the current positioning by non-commercials should be seen as a significant indicator.
For derivative traders, this suggests that strategies benefiting from a rise in oil prices may be favorable in the coming weeks. This could involve looking at long call options or bull call spreads to gain upside exposure while defining risk. Given the recent increase in market volatility, which saw the VIX touch 15 last week, managing position sizes carefully is essential.
