West Texas Intermediate (WTI) crude oil futures are up an impressive 27.2% in just the last 9 months.
After hitting a high of $US108.93 a barrel on July 19, the long-oil trade took a breather, but last week, oil supply disruptions in Libya sent futures back toward recent highs, and today, WTI trades around $US106.50 a barrel.
“Oil is now, according to our commodities team, the most richly traded commodity in the world in real terms after massive appreciation over a multi-year horizon,” say Deutsche Bank strategists Rocky Fishman,
Salil Aggarwal, and Lon Parisi.
BofA Merrill Lynch analysts MacNeil Curry, Jue Xiong, Stephen Suttmeier highlight how extreme positioning in the asset class has become, using data from the latest weekly Commitment of Traders report from the CFTC.
“Large speculators reduced WTI crude oil longs to $US37.4 billion from $US38.7 billion notional [last week],” write the BAML analysts in a note to clients. “Despite the marginal pullback, both net notional and net notional as a [percentage of open interest] are near record all time highs.”
Extreme positioning could become a risk in the event of a sell-off as “fast money” hedge fund types of investors, which are included in the “large speculators” category of the Commitment of Traders report, exit the asset class.