Heating Oil (NY Harbor ULSD) - Week Ending December 23, 2025

Executive summary

This report covers positioning in the NY Harbor ULSD (Heating Oil) futures market for the week ending Tuesday, December 23, 2025. The most significant development was a sharp bearish shift from Managed Money, who aggressively liquidated long positions and added new shorts. This selling pressure was absorbed primarily by Swap Dealers, who significantly increased their already large net long position. Commercials, the natural shorts, made only minor adjustments, slightly reducing their hedge book. The overall market saw a decrease in open interest, suggesting a net exit of capital. Notably, this bearish speculative flow occurred against a backdrop of rising prices in the two days leading up to the report, creating a key divergence to monitor.

Positioning (net, extremes vs recent weeks)

Due to the absence of historical data (prior_cot_weeks was empty), it is not possible to compare current positioning levels to their recent or historical ranges (e.g., 52-week highs/lows). The analysis is therefore limited to the absolute positions as of December 23rd.

• Managed Money (Funds): Net long +12,455 contracts (41,109 long vs. 28,654 short).
• Producer/Merchant (Commercials): Heavily net short -98,199 contracts (83,355 long vs. 181,554 short), reflecting their typical hedging posture.
• Swap Dealers: Substantially net long +61,890 contracts (66,254 long vs. 4,364 short), acting as a primary counterparty to commercial shorts.
• Other Reportables: Modestly net long +2,887 contracts.
• Non-reportable (Retail): Net long +20,967 contracts.

Flows and week-over-week changes

The reporting week was characterized by a distinct transfer of risk from speculative funds to swap dealers.

• Managed Money made a strong bearish move, reducing their net long position by -7,514 contracts. This was driven primarily by aggressive long liquidation (-6,484 contracts) combined with a modest addition of new shorts (+1,030 contracts).
• Swap Dealers moved in the opposite direction, increasing their net long exposure by +6,575 contracts. This was composed of both new long positions (+5,257) and the covering of shorts (-1,318).
• Producer/Merchants were relatively inactive, making a minor bullish adjustment. They reduced their net short position by +742 contracts, cutting more short hedges (-5,975) than long positions (-5,233).
• Open Interest fell by -7,088 contracts, indicating that the selling (particularly from Managed Money) resulted in a net closure of positions rather than just a transfer to new participants.

Commercials vs Speculators

The market exhibits a classic structure with commercials holding a large net short position against a collection of speculative and financial players.

• Commercials are the anchor short, using the futures market to hedge physical inventory and forward sales. Their short position of -98,199 contracts is the largest net position by any single category.
• Speculators, led by Managed Money, are currently net long but showed significant bearish conviction this week. The heavy selling from this group suggests a deteriorating view on near-term price direction.
• Swap Dealers are the key offset, holding a large net long of +61,890 contracts. They are effectively providing liquidity to commercial hedgers and, this week, absorbed the significant selling flow from Managed Money. The divergence in behavior between Funds and Swaps was the defining feature of the week.

Open interest and participation

• Total Open Interest: Stood at 352,627 contracts, a decrease of 7,088 from the prior week, signaling a reduction in overall market participation.
• Market Share: Commercials dominate the short side, with their positions accounting for 51.5% of total open interest. Managed Money's share is more modest, with longs at 11.7% and shorts at 8.1% of the market.
• Concentration: Concentration among the largest traders is moderate. The 4 largest traders hold 16.1% of the net short position, and the 8 largest hold 23.2%. This does not suggest an overly concentrated or squeezed market.

Price context

The provided price series is very limited, containing only two data points for the front-month contract.

• On Monday, December 22, the contract closed at $2.1548.
• On Tuesday, December 23 (the 'as of' date for the COT report), the contract closed higher at $2.1918.

This price increase of ~1.7% into the close of the reporting period stands in direct contrast to the strong bearish flows from the Managed Money category. This divergence implies that the selling from funds was either absorbed without pressuring prices or occurred earlier in the week, with prices recovering into Tuesday's close.

Risks and watchpoints

• Fund vs. Price Divergence: The primary watchpoint is the stark disconnect between Managed Money liquidating longs and a rising price. This raises the question of whether the fund selling is now exhausted or if they are fighting a resilient market. Continued selling from this category could eventually weigh on prices if other buyers, like Swap Dealers, step back.
• Swap Dealer Absorption: Swap Dealers' willingness to add over 6,500 contracts to their net long position was critical in supporting the market. A reversal or pause in this buying would remove a key pillar of support and could leave the market vulnerable to further speculative selling.
• Holiday Liquidity: The report covers the period ending just before the Christmas holiday. The decline in open interest may reflect traders closing books for the year. Market conditions could remain thin, potentially leading to exaggerated price moves on any subsequent news or flows.
• Lack of Historical Context: The analysis is constrained by the lack of prior weeks' data. We cannot determine if the current Managed Money net long of +12,455 contracts is an extended position ripe for further liquidation or a relatively neutral stance.