JPMorgan (NYSE:JPM) has observed a significant change in the positioning of Brent crude futures by different market participants since the pandemic.
The bank highlighted a structural shift, with the managed money category showing a tendency to hold more net long positions, while the supply of net short positions by the producer/user category has diminished.
The change in market dynamics was taken into consideration by JPMorgan, which noted that discretionary speculative investors have shown a pronounced preference for holding overweight positions in oil futures.
This trend was particularly evident in September 2023 and continued into early April 2024. Despite these overweight positions, the market did not exhibit extreme levels that would typically trigger reversion or profit-taking signals by momentum traders, such as Commodity Trading Advisors (CTAs).
The analysis by JPMorgan suggests that the market's behavior in terms of futures positioning has altered compared to the pre-pandemic period. This could indicate a new pattern in how different types of traders are engaging with the oil futures market.
The bank's findings are based on the behavior of discretionary speculative investors, who have not yet reached the momentum signals that would suggest an impending shift in their trading strategies.
This implies a steady interest in oil futures without the momentum extremes that could lead to significant market movements.
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