OIL COT
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http://www.marketwatch.com/story/bets-oil-will-rise-past-110-flirt-with-record-2011-04-29
SAN FRANCISCO (MarketWatch) â Most U.S. hedge-fund and other money managers are betting oil will climb further, signaling support for prices from this influential but fast-moving group of commodities investors.
But analysts warn that money managersâ net long positions, which rose to a record in early March and have hemmed in close to the high mark in recent weeks, are too blunt of an indicator to be used in isolation.
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âAs a trading tool goes, it is more like a sledgehammer than a scalpel,â said Tim Evans, an oil analyst with Citigroupâs Citi Futures Perspective.
Net long positions in benchmark West Texas Intermediate, or bets prices will continue to rise, rose to a record 311,632 positions in the week of March 3, according to the Commodity Futures Trading Commission, the U.S. futures regulator.
That week oilâs most-active contract rose nearly 7%, following gains of 9% the previous week.
Net longs declined slightly afterwards, just to creep back to 305,297 positions in early April. The most recent data, pertaining to the week ended April 19, shows net long positions at 289,916. The CFTC releases its next weekly report Friday.
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Oil analysts watch this weekly data to get a sense of the institutional support for oil prices. Basic supply and demand factors, including a recovering global economy and unrest rocking Middle Eastern and North African producers, have accounted for much of oilâs 23% rise this year. But demand from financial investors seeking to capitalize on fundamental trends has likely also helped.
Silver prices too hot for buyers?
Silver's "almost vertical ascent" is just one of many signals suggesting the metal's rally is reaching a top, says Richard Ross, chief technical strategist at Auerbach Grayson. Gold, or better yet, copper, offer better value.
âYou can use it as a momentum play,â as long as you also watch out for extremes that can point to oversold conditions, said Matt Smith, an oil analyst with Summit Energy in Kentucky, of the CFTC positions.
The data unequivocally shows commodities and oil in particular becoming more popular as investments, he said.
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Open interest, or all outstanding Nymex oil contracts held by producers, money managers, and other buyers, shot up to 3.1 million contracts by early March, and has hovered around that mark ever since, or roughly in line with 2008 open-interest levels as oil prices came off a peak.
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Indeed, this yearâs jump in oil prices past $110 a barrel -- to $112.86 for the June contract CLM11 -0.37% on Thursday -- has come even as global supplies remain plentiful, suggesting an investor rush for better returns could also be feeding into prices.
Hindsight
Those high levels, bringing oil prices closer to the record settlement of $145.29 a barrel reached in July 2008, also carry a warning for investors tempted to use position data as a forward indicator for higher prices.
During oilâs last big runup and sudden drop three years ago, money managers started to reduce their long positions heading into the peak for oil prices. But they held onto the bulk of their positions both before and after.
About 60% of money managersâ net long positions held in February 2008, when oil surpassed $100 a barrel, were still on the books by early July when oil climbed toward its $145 high.
The change did represent a decline in long positions. From around 150,000 positions in February, they slid to 92,000 in July, and those bullish bets kept falling further in September and October as prices dropped sharply.
But by the end of the year, months before oil had reached a low, the managers had long positions of 82,000 positions. In early February 2009, as oil prices sunk near $34 a barrel, net long positions hovered around 94,000.
Some managers rotated positions and were net longs âone degree or another the whole way down,â said Evans in a separate e-mail interview. âThat said, there was a net flow of selling that began ahead of the price peak and continued for months, contributing to the price drop.â
Oil prices have more than tripled since hitting a bottom in February 2009.
Commitments of traders data are a powerful tool -- but only in hindsight, said Kyle Cooper, managing director of IAF Advisors in Houston.
While looking back has some validity, âyou just donât know at what point it finally came to a top,â said Cooper.
How was it you put it? "No, CL lives in a cave far from civilization. It answers to no index!" and I said "
Sometimes it answers. or pretends to, and then it changes it's mind.