Algorithmic traders, known as Commodity Trading Advisors (CTAs), are scaling back their involvement in the oil market as they face consecutive years of losses. This retreat is expected to keep volatility subdued, as the market shifts focus from speculative geopolitical risks to more stable supply-demand fundamentals. The anticipation of an oil supply glut, coupled with concerns over deflation in China, is dampening the prospects for significant price increases, leading CTAs to reduce their speculative positions.
The reduced presence of CTAs, who typically amplify market volatility through trend-following strategies, suggests a more stable price environment for crude oil in 2025. While geopolitical risks, such as potential US sanctions on Iran and Russia, could still trigger short-term price movements, the prevailing expectation of oversupply is likely to dominate market sentiment. This environment makes speculative trading less attractive, prompting CTAs to minimize their exposure.
As of 14:41 on January 9, the price of Brent crude oil (CO1) stands at $76.99, up from its last close of $76.16. The market opened at $76.16, reaching an intraday high of $77.21 and a low of $75.70, reflecting the ongoing influence of supply-demand dynamics over speculative trading activities.