Heating Oil (NY Harbor ULSD) Futures - Week Ending 2026-02-06

Executive summary

This week's report was defined by a major and aggressive shift in speculative sentiment, clashing directly with price action. Managed Money added a significant 13,203 net long contracts, flipping their position to the most bullish in over a month, primarily through aggressive short-covering. This occurred despite a sharp price drop during the reporting period. In contrast, Commercials (Producer/Merchants) remain heavily net short, though they slightly reduced their bearish hedges. The overall market saw a significant decline in open interest, suggesting a net liquidation of positions even as speculators piled into longs. The key theme is the divergence between speculative bullishness and weakening prices, creating a tense market dynamic.

Positioning (net, extremes vs recent weeks)

• Managed Money: Flipped to a strong net long position of +24,377 contracts. This is a dramatic reversal from a net short position of -5,460 contracts just three weeks ago (Jan 16) and is the most bullish stance for this category in the provided six-week history.
• Producer/Merchant (Commercials): Remained deeply net short at -109,238 contracts. While this is a vast short position, it represents a slight reduction from the prior week's net short of -112,090 contracts.
• Swap Dealers: Held a significant net long position of +65,187 contracts. This is a reduction from the prior week's +70,427 contracts but continues to position them as a key long counterparty to commercial short hedging.

Net Positioning History (Contracts): | Reporting Date | Managed Money | Producer/Merchant | Swap Dealers | | :--- | :--- | :--- | :--- | | 2026-02-06 | +24,377 | -109,238 | +65,187 | | 2026-01-30 | +11,174 | -112,090 | +70,427 | | 2026-01-16 | -5,460 | -100,310 | +72,975 | | 2026-01-09 | +451 | -96,319 | +68,709 | | 2026-01-05 | +3,628 | -99,687 | +67,271 | | 2025-12-23 | +12,455 | -98,199 | +61,890 |

Flows and week-over-week changes

• Managed Money was the most active participant, posting a net change of +13,203 contracts. This was a powerful bullish move composed of significant short-covering (-8,956 contracts) and fresh long additions (+4,247 contracts).
• Producer/Merchants made a minor adjustment, reducing their net short position by +2,852 contracts. This came from a modest increase in longs (+1,201) and a reduction in shorts (-1,651).
• Swap Dealers reduced their net long exposure by -5,240 contracts, driven almost entirely by liquidating long positions (-4,801 contracts).
• Other Reportables saw a massive liquidation, with a net change of -11,759 contracts, shedding a large number of long positions (-9,336).

Commercials vs speculators

The classic dynamic between hedgers and speculators has intensified. - Commercials (Producers/Merchants) maintain a structural net short position of -109,238 contracts, equivalent to 54.0% of all short-side open interest. They continue to use the futures market to hedge physical product against price declines. - Speculators (Managed Money) are now positioned aggressively for higher prices, holding a net long of +24,377 contracts. The 19 short-side Managed Money traders hold just 6.1% of short OI, while the 40 long-side traders hold 12.8% of long OI. The divergence between these two core groups is now at its widest point in the recent period.

Open interest and participation

• Total Open Interest fell sharply by 14,078 contracts to 366,997. This significant drop alongside a major build in the speculative net position is unusual. It suggests that while Managed Money was adding risk, other participants were closing out positions and leaving the market.
• Concentration on the short side remains moderate. The largest four traders hold 15.8% of the net short position, and the largest eight hold 22.1%. This indicates that while the commercial short position is large, it is not controlled by an overly small number of entities.

Price context

The provided daily price series shows a critical divergence with the positioning changes. The COT data is collected as of Tuesday, February 3rd. - In the days leading up to the February 3rd cutoff, prices experienced a sharp reversal. After closing at a high of 2.5023 on January 30th, the front-month contract fell sharply to 2.4303 on February 2nd and 2.3661 on February 3rd. - This means the powerful bullish buying from Managed Money (+13,203 net contracts) occurred directly into a falling market. They were either buying the dip with high conviction or were caught on the wrong side of a sudden downturn. - In the remainder of the week (through Friday, February 6th), the price remained weak, closing at 2.3891. This suggests the newly added speculative longs were immediately under pressure.

Risks and watchpoints

• Speculative Pain Point: The primary risk is the large, and likely unprofitable, new net long position held by Managed Money. If prices fail to rebound, this group could be forced to liquidate, which could add significant selling pressure to the market.
• Divergence Resolution: The divergence between bullish speculative flows and bearish price action must resolve. Watch for either a price rebound that validates the speculative buying or a capitulation from Managed Money that could lead to a deeper price correction.
• Commercial Hedging Pressure: The large commercial net short position provides a natural cap on rallies, as producers are likely to continue selling into strength to lock in hedging levels. A significant reduction in this short base would be required to signal a more durable, fundamentally driven rally.
• Falling Participation: The drop in Open Interest is a sign of caution. It indicates a lack of broad-based conviction and could lead to a more volatile, less liquid market environment where large flows can have an outsized impact on price.