Crude Oil Short Positions Hit All-Time Highs: Short Squeeze Risks Coexist with CTA Selling Pressure
Claire Weston
Managed-money funds sold $24.8 billion of Brent over seven straight weeks, pushing nominal short open interest to a decade high; extreme positioning now faces off against systematic selling pressure, with Strait of Hormuz transit volumes dropping to zero.
How large is the short pile-up?
Goldman's futures trader Robert Quinn, citing COT data, reports managed-money funds sold roughly $7.5 billion of Brent in the week of June 9–16 — the largest single-week nominal sell since "Liberation Day."
That marks seven consecutive weeks of net selling, totaling $24.8 billion.
This means → about 80% of the selling was new short positions, not longs liquidating. Nominal short open interest has risen to a ten-year high.
How much firepower do the bulls have left?
Net longs have dropped below pre-Ukraine-war levels, sitting in the lowest quartile of the past five years.
Options markets echo the bearish tilt: the one-year percentile rank of Brent's 1-month 25-delta put/call skew hit 91%, with a pronounced put-heavy lean in the front end.
In plain terms = whether you look at positioning or options, the directional bearish bet on crude is at an extreme.
Then why did prices actually bounce?
From June 16 to 19, the August Brent contract rallied roughly 2%. Three triggers converged: U.S.–Iran nuclear talks stalled over the Israel–Lebanon conflict; Strait of Hormuz AIS transit volumes fell to zero (per Windward data); and tensions over Iran's "license" authorization escalated.
This reflects a core dynamic — extreme short positioning is itself the fuel for a rally. When geopolitical risk spikes, shorts are forced to cover, squeezing prices higher.
Quinn notes that short-covering potential remains high, but systematic selling pressure could equally persist.
What is the CTA model warning?
Goldman's CTA model — a framework tracking price-momentum-driven systematic strategies — shows CTAs are only mildly selling in the current observation window. The dominant sellers this cycle are discretionary managers with explicit tactical views.
The model warns: if oil drops another 4% to 5%, the medium-term momentum signal flips negative, and systematic selling could amplify significantly.
This means → the gap between the current price and the threshold that triggers broad CTA liquidation is not wide. A breach could shift the sell-off from "active shorting" to "machines piling on."
What to watch next?
The market sits at a standoff between two forces: the short-squeeze potential embedded in extreme positioning vs. the systematic selling pressure driven by expectations of easing geopolitical tensions.
A marginal shift on either side could trigger nonlinear price moves — not a steady drift, but a sudden jump.
Strait of Hormuz transit volumes are the key variable: if they stay at zero, squeeze odds rise; if they normalize, selling pressure regains the upper hand.
Content is for reference only, not financial advice.