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The "Long" And The "Short" Of It With Oil Prices

Is this a short-covering rally that's taken oil prices to another milestone over $120/barrel? Traders here on the NYMEX floor say it certainly feels like it.

Traders and analysts will be sifting through Friday's open interest datatoconfirm whether pension funds were in fact largely responsible to $4 rally at the end of last week.

They'll also pay close attention to today's open interest to see if signs of a trend are emerging among the so-called "speculators" in the oil trade (which includes hedge funds, large investment funds and pension funds) as the market has made this push. Those speculators have been held responsible, at least partially, for the record run-up in crude.

Yet, the latest CFTC Commitment of Traders Report showed last week was the first in four in which speculators' net long positions actually declined. At the same time, speculative net short positions "saw their largest weekly addition so far this year," says analyst Oliver Jacob of Petromatrix.

What does all of this mean? Jacob's take is this: "The large speculative funds never really added significant new LONG positions in the break of 100 $/bbl and added significant SHORT positions on the $120/bbl resistance which I interpret as them not having a strong confidence in the rationale for the current prices."

It will we interesting to see if that plays out again now that oil prices are hovering back around $120.


Questions? Comments? energysource@cnbc.com