Through late 2024, WTI crude had formed a bullish market as fund buying accumulated to its largest scale in over a year on the back of US sanctions escalation against Russia and Iran. In January 2025, this dynamic reversed abruptly. Trump's inauguration (January 20th) marked the beginning of major energy policy shifts impacting markets.
Simultaneously with taking office, President Trump signed an executive order declaring a national energy emergency. On January 24th, he demanded that OPEC lower crude oil prices. These two moves were received by markets as a clear message that 'the US wants lower energy prices,' forming a selling flow.
In phases where policy risk drives markets, 'policy direction' determines short-term prices more than supply-demand fundamentals. Given the difficulty of predicting Trump's statements and actions, speculators choosing to 'maintain distance' was a rational response. However, policy risk is often temporary noise, and when divergence from actual supply-demand data persists, reversal risk emerges.
CFTC speculative positioning data vividly illustrates the market psychology of this phase. While selling accelerated primarily in managed money positions, the Number of Traders (the headcount of large position holders required to report to the CFTC) remained in a mixed state (neither bullish nor bearish).
A particularly important observation: the divergence flagged in the December 24th report — 'fund buying is at its largest in over a year, but the Number of Traders shows a declining buy-side force, revealing a temperature gap' — was confirmed to mean that the Number of Traders had been leading the market direction in advance. The quiet shift in Trader headcount read the market more accurately than the optimistic positioning of funds.
The 'temperature gap between net positions and Traders' is an important signal. While net positions reflect total market volume, the Number of Traders reflects the breadth of participation and the distribution of forces. When the two diverge, the Number of Traders tends to be the more accurate leading indicator of market reality. This was reconfirmed as the December analysis pre-emptively predicted the January 2025 developments.
The forward curve maintained backwardation but entered a gradual downward adjustment from its peak following the reversal of the rally that had continued since late 2024. There are no abnormal readings or signs of overheating; the curve adjustment is mild in character.
Inter-commodity spreads (vs. Brent, Oman, etc.) showed no major movement, with the market overall in a settled state. This indicates geopolitical risk is not concentrating in specific regions, and no major changes have occurred to the basic supply-demand structure.
A phase of stable inter-commodity markets indicates the overall market balance is being maintained. When WTI-Brent divergence widens, it signals regional concentration of geopolitical risk or transportation route issues. Current stability means Trump trade impacts are affecting price levels but have not yet reached structural market distortion.
Citigroup's simultaneous upward revision of its 2025 crude price forecast on geopolitical risk grounds and warning that 'Trump trade impacts could cause second-half softening' symbolizes the current market uncertainty. The need to flag both upside and downside risks within the same report underscores the directional vacuum.