Heating Oil COT Report for the week ending January 5, 2026

Executive summary

This report covers a week of significant bearish repositioning in the Heating Oil futures market. Speculative participants, primarily Managed Money, drastically reduced their net long exposure, a move that coincided with a notable drop in front-month futures prices. This selling was absorbed by Swap Dealers, who increased their own net long position. Commercials (Producers/Merchants) remain the dominant short-side force, slightly adding to their hedge positions. The overall decline in open interest suggests the price drop was driven more by the liquidation of existing long positions than by aggressive new short selling.

Positioning

• Managed Money: The speculative net long position was slashed this week, falling from +12,455 contracts to just +3,628 contracts. This is a significant reduction in bullish conviction and the smallest net long held by this group in the provided data.
• Producer/Merchant: Commercials remain heavily net short, as is typical for this category. Their net short position deepened slightly from -98,199 to -99,687 contracts, indicating continued producer hedging.
• Swap Dealers: This category holds a substantial net long position, which grew from +61,890 to +67,271 contracts. They effectively absorbed the selling pressure from the Managed Money category.

Flows and week-over-week changes

The market saw a clear rotation out of speculative long positions during the reporting week. - Managed Money: Executed the most significant change, cutting their net long position by 8,827 contracts. This was driven by a large reduction in gross longs (from 41,109 to 34,619) and a smaller increase in gross shorts (from 28,654 to 30,991). - Producer/Merchant: Increased their net short position by 1,488 contracts, primarily by adding 1,425 new short positions while holding longs relatively steady. - Swap Dealers: Increased their net long position by 5,381 contracts, driven by the addition of 5,589 new long contracts. - Non-reportable: Smaller retail traders reduced their net long position from +20,967 to +14,766 contracts, adding to the overall bearish pressure.

Commercials vs speculators

The classic dynamic of commercial hedgers versus speculators was on full display. - Commercials (Producers/Merchants): Hold the largest net position in the market with a short of -99,687 contracts, representing their core hedging activity against physical inventories or production. They represent 53.2% of all short open interest. - Speculators (Managed Money): Dramatically retreated from their bullish stance. Their net long of +3,628 contracts is now marginal, indicating a significant de-risking or shift in market view. - The other side: Swap Dealers are providing the primary long-side liquidity opposite the commercial shorts, holding a net long position (+67,271) that is nearly 19 times larger than that of Managed Money.

Open interest and participation

• Open Interest: Total open interest declined by 8,902 contracts, falling from 352,627 to 343,725. A drop in open interest alongside a price decline typically signals long liquidation, which aligns with the observed Managed Money selling.
• Participation: The total number of reportable traders was stable at 205 (up from 204). The number of Managed Money long and short participants was also largely unchanged.
• Concentration: The short side of the market remains moderately concentrated. The largest four traders hold 16.4% of net short positions, while the largest eight hold 22.9%. These figures are little changed from the prior week, reflecting the stable presence of large commercial hedgers.

Price context

The positioning changes are well-correlated with the price action during the reporting period. - The front-month Heating Oil futures price fell from a close of $2.1837 on the previous report date (December 23, 2025) to $2.1191 on the current report date (January 5, 2026). - This price decline aligns directly with the substantial long liquidation seen from the Managed Money category and the reduction in overall open interest.

Risks and watchpoints

• Managed Money Capitulation: The dramatic exit from longs by Managed Money is the most critical development. Continued selling or a flip to a net short position would signal a more entrenched bearish trend. Conversely, any sign of them re-establishing long positions could suggest the washout is complete.
• Commercial Hedging: The Producer/Merchant net short position remains a massive and stable feature of the market. While they added to shorts this week, any significant reduction in this position (short-covering) would provide a powerful catalyst for a price rally.
• Swap Dealer Absorption: Swap Dealers stepped in to buy what speculators were selling. Their capacity or willingness to continue absorbing sales is a key variable. If they begin to unwind their large +67,271 contract net long position, it could exacerbate any further price weakness.