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-->Crude Oil Fair Price Analysis (***NEW!***) -->Positions & Convictions Of Crude Oil Traders
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Oil ETFs such as USO, UCO, and UWTI must hold futures contracts in order to track the commodity's day-to-day changes. The funds must rollover these contracts a week or so prior to expiration in order to avoid taking delivery of physical product. The charts below show the current futures contract holdings of these products.
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Source:VelocityShares |
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The "Fair Price" of natural gas is an estimate of a neutral valuation for crude oil based on the current oil surplus or deficit versus the 5-year average. The departure from average is compared to weeks in the previous 6 years with a similar surplus or deficit and calculating the average price of natural gas at those times. Because oil is valued not only by current supply and demand but by the predicted state of the market, this Fair Price calculation is performed based on projected storage levels on a weekly basis. This data is shown on the graph to the left. If the current Futures Price is below the Fair Price, the commodity is said to be undervalued with prices more likely to rally than pullback. If the Futures Price is above the Fair Price, the commodity is said to be overvalued with prices more likely to decline. Click HERE for more details regarding storage projections on my Crude Oil Inventories page.
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The Commodity Futures Trading Commission (CFTC) releases data and analysis on natural gas option positions each Friday afternoon at around 3:30 pm EDT for the preceding Tuesday. This includes total open interest and breakdown of long and short contracts amongst money managers, all of which is shown below. One natural gas contract represents 10,000 MMBTU's, or about $25,000. Source: Commodity Futures Trading Commission.
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Open interest represents the total number of contracts that have not been settled or offset by delivery. A spike in open interest often precedes an increase in volatility as more money flows into the market. A declining open interest suggests that major traders are liquidating their positions, possibly heralding an end to whatever the current trend is. The data shown below includes open interest for all contracts traded, including money managers, producers, merchants, and swap dealers.
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The data below shows a breakdown of open long contracts versus open short contracts among money managers.
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The chart below is a derivative of the chart to the left and shows the percentage of all outstanding contracts among money managers that are held on the long side. A percentage above 50% suggests that investors are net long and inherently bullish.
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Disclaimer: Natural Gas & Oil Storage Projections, Intraday Natural Gas Stats, Renewable Energy Stats, Morning Reports, and fundamental pricing models are released by Celsius Energy as experimental products. While they are intended to provide accurate, up-to-date data, they should not be used alone in making investment decisions, or decisions of any kind. Celsius Energy does not make an express or implied warranty of any kind regarding the data information including, without limitation, any warranty of merchantability or fitness for a particular purpose or use. See full Privacy Policy HERE.