Oil Traders In the Dark Without Positioning Data During Shutdown

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The missing reports could flush speculative traders out of risky assets, like oil, amid seasonally low market participation ahead of the winter holidays. Reduced liquidity would make it even trickier to make money in a trading environment investors have been lamenting all year. 

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“Week after week after week, it’s getting to be a bigger deal,” he said. 

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In late September, hedge funds were close to the most bearish on US oil on record, according to the last available set of data. Since then, Washington imposed sanctions on Russia’s biggest oil companies, even with the market still seen headed for oversupply — meaning that positioning could be all over the map.

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And just a few weeks ago, hedge funds held record-short positions on Brent oil, before reversing course at the fastest pace ever, highlighting how quickly and unpredictably positioning can shift. Because Brent trading reflects regional dynamics outside of the US, it’s an imperfect proxy for the missing COT data.

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Limited surveillance

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The CFTC has pulled back on most of its surveillance activities until funding is restored, furloughing about 91% of its 543 employees, it said in documents outlining its plan for the shutdown. That also includes many staff who typically would be in charge of surveilling markets for derivatives tied to oil and other commodities. 

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An agency spokesperson sent this response when emailed for comment: “Hello, I am in the office today, however, due to a lapse in federal government funding, the law requires that I respond only to emails that relate to emergency matters.”

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Even before the shutdown, the CFTC had come under political pressure, firing about a dozen probationary employees earlier this year as the Department of Government Efficiency, or DOGE, worked its way through the federal workforce. It put even more on administrative leave and sent out reduction in force letters, including to many enforcement staff. President Donald Trump’s administration has slashed thousands of federal jobs and programs, from building inspectors to clean energy initiatives. He’s also fired the head of the Bureau of Labor Statistics after the highly regarded monthly jobs report showed weaker hiring.

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“The president has declared that there’s no such thing anymore as independent regulators, all regulators are now political operations operating out of the White House,” said Tyson Slocum, the director of the energy program for Public Citizen, a nonprofit consumer advocacy organization. “There’s an ideological lean here, to not engage in aggressive oversight.”

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A significant amount of surveillance is also conducted by the energy and commodity exchanges, operated by CME Group. 

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“We continually surveil our markets and prosecute any violations of our rules,” a spokesperson for CME Group said in an emailed response to questions.  

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But some industry participants warn that self-regulation can be risky.

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“The exchanges are positioned to provide a type of oversight and enforcement mechanism,” Slocum said. “But it is limited and severely conflicted due to the fact that the exchanges are all for-profit entities.”

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For its part, the CME Group said it is a neutral facilitator of risk and not a participant in the market. “Whether the government is shut down or open, market integrity is critical for the entire marketplace. Our standards for regulatory oversight will never be compromised under any circumstance,” it said.

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The shutdown is heightening the focus on alternative data providers. Firms like Energy Aspects Ltd. publish data that approximates positioning across oil and other commodity markets. Bridgeton Research Group LLC. offers insights on algorithmic trader positioning, which typically moves in tandem with that of money managers. But it is far from a complete picture. Algorithmic traders only make up roughly 15% to 20% of total speculator positioning covered in the COT reports, though “their positions are often more dynamic than other players,” according to Bridgeton.