Distribution of commercial longs- all time. Source: Duggan Capital.
In summary: Specs still short at high but not maxed out levels- I’m expecting a turnaround this week, where they reduce shorts with a blowout on the bottom on price. Commercials are buying up physical delivery, I suspect in prompt delivery months. I only expect this to last for another 3 weeks max. So expecting Commercials to continue to build net length faster than net shorts.
The soundbite-Specs still selling into growing commercial length. I expect the short squeeze may hit this week. With the OPEC+ activity this weekend, a setup of sell the rumour, buy the fact can easily play out.
Trade
Price action note: What we have had over the last week was the positioning lift against increased net short spec (non-commercial) traders. We indeed hit the QVWAP $65.67 upside target. With beautiful timing, newswires started to air what was a whisper a week ago – OPEC+ to potentially raise again at a meeting this weekend by 1.66mln bpd.
The market as expected started to price this in- printing back down for the whole day. This really was a fantastic get out of jail card for the shorts, who were getting mega squeezed: read ‘Bounce’.
Interesting order flow on Wednesday in the chart below. You can see that from 11am London time, relative volume jumped to approx 800% average volume for that time of day. Cumulative net delta went -2000 (i.e buyers being overwhelmed by 2000 more contracts sold than were buying) with the market printing down -2% / about $1. I took this as sellers initiating new contracts. However, once this large volume had been deployed, you can see that buyers stepped in for the rest of the day, with the market going positive net delta, actually ending the day +5000 contracts. The net result an aggressive absorption of sellers to little net price effect. Price closed +1.68% on the day. There are a few ways to interpret all this.
