TTF selloff: tactical pause?
HOT TAKE: Hedge funds liquidate big chunk of TTF long position, but this is not a structural reversal — yet
Investment funds liquidated a sizeable chunk of their gargantuan net long position in European gas futures last week, as the front TTF month contract crashed by 12% across three hectic trading sessions.
This quick-fire Hot Take examines yesterday’s Commitment of Traders report to gauge whether last week’s chaotic selloff marks a structural shift in the late winter gas market.
The CoT reports are far from perfect, but they do give some valuable insight into the single biggest factor driving EU gas price action: hedge fund capital allocation in TTF gas futures.
For reasons I set out below, last week’s bearish repositioning looks more like a tactical pause in anticipation of a rebound and further volatility in the current feverish geopolitical climate.
Softening fundamentals might justify a complete reversal of sentiment and price direction, and indeed prices continued falling this week. But since when have such pedestrian matters as supply and demand mattered more than speculative capital flows? 😉
💥 Article stats: 1,200 words, 5-min reading time, 9 charts and graphs