Last Friday the CFTC re-categorised the way it presents trader positions in its weekly report to reflect more specifically the type of contracts being held by “managed money” and “swap dealers” — ie, funds and index-funds or financials hedging swap positions.
Anyone hoping the figures would, once and and for all, prove speculative positions controlled far too much length in the energy market might, however, be disappointed.
According to Barclays Capital, which interpreted the dataset on Monday, the numbers actually showed that speculators were not in a position to be driving energy prices higher currently.
As BarCap summed up (our emphasis):
…the latest CFTC data showed large liquidations in both WTI exchanges (NYMEX and ICE), totalling 19.4 K lots to 42.2 K lots in the futures market, along with further reduction in net length in both gasoline and heating oil markets.
The CFTC also published detailed data by category for the first time last week, and the share of index positions (swap dealers), including futures and options, remains extremely small relative to the total market size. For NYMEX crude oil, the swap dealer long only makes up 6.4% of total open interest, smaller than the 10.3% longs made up by the producer/merchant/ processor/user category, but more significantly, far less than the 16.1% in short position held by the same category.
Thus, using these numbers, we would find it extremely hard for anyone to argue that index traders distort the market and falsely inflate prices. Indeed, this strongly supports the notion that swap dealers are providing liquidity to those with physical risks to manage, a view we have long held.
Although, we might add, that sort of benign open-interest presence by speculators was not so much the case in gold. As Barcap also stated:
…the CFTC’s new disaggregated report shows that swap dealers’ and money managers’ positions as a percentage of open interest equal to 50.2%, which is similar to the percentage of noncommercial positions of open interest (48%) from the old report.
In defence of energy speculators – FT Alphaville
Dresdner/Commerzbank blames oil speculators – FT Alphaville
New commodity trader categories: What do they tell us about speculators? – FT Alphaville