"You Would Be Absolutely Shocked How Large Their Positions Are": The Most Important Oil Traders You've Never Heard Of

While it is hardly a surprise to regular readers and veteran traders, some of our newer, less experienced visitors may be confused why we dedicate so much digital real estate to the market impact of CTAs, aka Commodity Trading Advisors (most recently in "CTAs Just Bought The Most US Stocks In A 10-Day Period On Record"). The answer is simple: in the hierarchy of market "influencers" CTAs - despite their relatively modest trading volumes and despite their erroneous name since in addition to commodities they trade every other asset class too - routinely rank toward the top in terms of market impact and momentum (in a very reflexive way, since by definition they are momentum traders and trend followers), but nowhere more so than in the world of commodities in general, and oil in particular.

Why oil? Well, because as Bloomberg explains in a lengthy note looking at the impact of CTAs on the unprecedented surge in oil volatility, what is going on in much more than just day to day fundamentals. Indeed, "just in the past two months, prices threatened to reach $100 per barrel, only to whipsaw into the $70s. On one day in October, they swung as much as 6%. And so far in 2023, futures have lurched by more than $2 a day 161 times, a massive jump from previous years."

As Bloomberg correctly notes, what’s happening can’t be entirely explained by OPEC’s machinations, or war in the Middle East: "While supply-and-demand fundamentals still dictate overall commodity price cycles, the day-to-day business of trading crude futures is increasingly dominated by speculative forces, fueling volatility and driving a disconnect between physical and paper markets."