Hedge funds and other money managers have been actively adjusting their positions in the petroleum futures and options market. Over the seven days ending on January 16, investors sold the equivalent of 11 million barrels in the six most important contracts [f5c1185e]. There is a strong preference for Brent over WTI on the crude oil side, while U.S. contracts are favored over European gas oil among fuels. Hedge funds were extremely bearish towards WTI, with a net position of just 43 million barrels, the third-lowest weekly position since 2013. On the fuels side, bullish positioning in U.S. gasoline and U.S. diesel contrasted with very bearish positioning in European gasoil. Hedge funds are trying to build a bullish position in U.S. gas, anticipating that very low prices will eventually eliminate the current excess inventories. Over the same period, hedge funds purchased the equivalent of 331 billion cubic feet (bcf) of gas in the two major futures and options contracts. Gas production growth is decelerating, and the impact of a very strong El Nino that suppressed heating demand during the winter of 2023/24 is expected to fade [f5c1185e] [9b68c4b6]. Portfolio investors anticipate petroleum prices will remain rangebound in the short term [ed988278].
According to a report by Zee Business, hedge funds and other money managers have purchased oil at the fastest rate for more than four years. This frenzy of buying comes amidst optimism that Saudi Arabia and its OPEC+ allies will continue to restrict production. Investors purchased the equivalent of 140 million barrels in the six most important futures and options contracts linked to petroleum prices, marking the fastest buying since December 2019 and among the ten fastest weeks since records began in 2013. The combined position across all six contracts has increased to 641 million barrels, the highest in six months. Fund managers have become moderately bullish or at least neutral towards the entire petroleum complex for the first time in months. However, portfolio investors remain bearish about US gas, with a net short position of 449 bcf on March 19. Several major producers have already announced cuts to drilling and production that should eventually eliminate the excess inventories [f5ee02d4] [f5c1185e].
Trading of CME Group Inc.'s lithium hydroxide futures contract is soaring, with a record high of 24,328 outstanding contracts in Q1 2024. Open interest extends to September 2025, indicating more liquidity for the nascent contract. The surge in open interest is a positive sign that the market is gradually maturing for the lithium industry. Prices of lithium are down more than 80% from the record high in November 2022. The drop in prices has created opportunities for funds, and more Asia-based funds are trading the CME contract this year. CME's lithium contract is on pace to shatter last year's record trading volume [82b6e1e9].
Coinbase Derivatives, the leading U.S. cryptocurrency derivatives exchange, announced it would launch retail-sized futures contracts for oil and gold on June 3. The size of the futures contracts will be based on 10 barrels of oil and 1 troy ounce of gold. On the same day, the Financial Times reported that CME Group is in talks to launch a spot Bitcoin market, competing with Coinbase. CME's Bitcoin futures contracts have an open interest of 31,000 contracts. Coinbase faces competition from CME, which has a nearly 50-year history with its gold futures. The London Metals Exchange closed down its gold futures in July 2022 due to low trading volume [b1495606].