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Trend-Following Traders Short WTI Crude Oil

Traders that pursue trend-following strategies are shorting WTI crude oil futures!

The negative sentiment has been to an extent they haven’t seen  in more than two years, according to a report from TD Securities that estimates their positions.

Tweet on WTI Crude futures

Chart on Crude Oil fluctuation

Oil prices have dropped by over $10 per barrel over the past month, and WTI futures settled at $74.25 on Tuesday, their lowest level of the year.

Oil prices have been on a downtrend since June after the war in Ukraine interrupted Russian crude supplies less than expected. Global demand has been threatened by China’s stop-and-start pandemic reopening, central banks’ moves to curb inflation and darkening economic projections for 2023.

The last time these traders were this short was in October of 2020, when their positions peaked at 25% of their maximum, according to the report.

Trend-following algorithms identify price trends during different time periods that can range from a week to a year. For much of the past three months, short- and long-term trends have conflicted, leading trend-following traders to keep their bets small. But the persistence of the recent downtrend may be tipping the balance in favor of wagering on further declines.


Image:Oil refinery