Publications: Notes at the Margin

Money Managers Rule Today (August 12, 2024)

 

As we discussed last week, conditional forecasts begun at various key points show that the oil price predicted from changes in the money managers’ net long position in crude oil futures and options came close (often less than $1 per barrel) to the actual WTI price. The predictions for Brent were not as accurate. However, over a fourteen-year period, the projections generated from the commitments of traders' data did very well.

 

These forecasts broke down for a time, however, after money managers did not react to the price collapse that followed OPEC’s November 2014 failure to reduce output. According to our conditional forecasts, that price collapse never occurred. Since 2022, though, OPEC+’s restoration of market control has reinstated the impact of hot money activity.

 

We also note that changes in the net positions of another category of traders can move prices. Recently, the shift in the “other reportables” positions reported by the CFTC provided support for prices.

 

The lesson is that while the actions of oil producers such as the OPEC+ nations “set” a base level for prices, money managers’ buying and selling of futures contracts influences the week-to-week, month-to-month, and year-to-year fluctuations from those base levels.

 

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