Hedge funds on the West staged profit taking move before the New Year and opted to start from a scratch the positioning in the new year. But Swap dealers NYMEX keep holding enormously high number of short positions, expecting major drawdown.
As of January 2, the volume of long positions in commercials decreased by 17.4 thousand contracts to 436.1 thousands. The amount of open short positions remained practically unchanged and at the start of the year was about 39.7 thousand contracts. Net “long” for crude oil, in turn, dropped to 396.4 thousands, but it is still above the average of the last three years by 186 thousand contracts, or almost twice.
On the other hand, swap dealers NYMEX attempted to confront hedge funds. Their expectations skewed downside according their positioning, so by January 2 they had opened almost 826 thousand contracts for the drop in quotations, which is an absolute record. Over the year, their bets increased by 440 thousand contracts, with the current oil prices of about 27 billion dollars.
Recall that swap dealers NYMEX are recognized as speculative hedge funds, which reduce their risks associated with physical commodity transactions, as well as traditional producers of crude oil.
If you look at the position of swap dealers in 2015, then they shorted oil throughout 2015, and by early 2016 significantly reduced their wagers for falling quotations. Today, the volume of short positions on their part has reached an unprecedented scale. If they massively start closing their positions, this can lead to a sharp rise of oil prices. However, growth is likely to be short-lived.