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Oil rally draws smart money buying; traders added shorts in gas before rally

Therally in crude oil prices that began with the meeting of OPEC members on Sept.28 prompted an influx of buying from "smart money" traders whoappeared to be willing to bet on the rally lingering for a while. Traders innatural gas reversed a trend of new long additions that had lasted severalweeks and showed that they may have added to shorts just before the rallygained momentum.

Datafrom the "Commitments of Traders" report from the CFTC published Oct.7 showed that crude oil traders classified as noncommercial boosted their netlong position by 71,324 contracts in the week ended Oct. 4 to reach 362,970.Prices advanced $4.02/bbl during the survey week.

Thechange was made through the addition of 27,507 new long positions, while shortswere reduced by 43,817. The change also included the first full week of tradingfollowing the meeting of OPEC members on Sept. 28, where they to set a target for oilproduction at a level slightly below their current output.

Tradersclassified as managed money revealed a similar trend in positioning, with thecategory increasing their net long by 67,892 contracts to reach 222,831. Someshort covering was evident with long positions increasing 19,050 while shortswere cut by 48,842.

Noncommercialtraders include those that are large enough to meet minimum position thresholdsbut are not involved in hedging, while the managed money category includesthose who engage in futures trades on behalf of investment funds or clients.Both are widely followed by traders and are considered to be "smartmoney," as their positioning can track or sometimes lead changes in pricetrends.

Innatural gas, noncommercials added to their net short position by 19,652 toreach 67,297 contracts in the week ended Oct. 4. The change was made throughthe addition of 15,829 new short positions, while longs were cut by 3,823contracts. Prices fell 3.2 cents during the survey week.

Managedmoney accounts cut their net long position by a total of 24,847 contracts,which brought their net long to 99,311. The change was made through theaddition of 16,516 new short positions while longs were cut by 8,331.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.