The Importance of Open Interest
- Open interest is an important analytical tool for futures markets
- Open interest measures money flows into and out of a commodity market
- The recent ULSD spike and collapse showed dynamic changes in open interest
- Industry analysts expect U.S. LNG export growth to show strong growth
Sincerely,
David Thompson, CMT
Executive Vice President
Powerhouse
(202) 333-5380
The Matrix
Open interest can often shed important light on market sentiment and the strength of price trends. Open interest usually changes from day to day, unlike the shares of a company which typically remain constant. Open interest is calculated by adding the number of contracts from opened trades and subtracting the number of contracts from when a trade is closed.
Open interest can be thought of as the amount of cash flowing into the market. Increasing open interest means money is flowing into a particular commodity and declining open interest indicates the reverse. It is very important to look at total or market open interest for a particular commodity, such as ULSD futures. This is the open interest for all contract months, not just the front-month contract.
Open interest adds interesting commentary to the dramatic price swings in ULSD futures over the last two weeks.
In the ancient history of two weeks ago, the market was dominated by the discussion of major importers finally turning away from Russian oil and the Ukrainian drone campaign knocking refineries offline. Between November 10th and the 17th, open interest in ULSD futures increased by more than 18,000 contracts. A similar dynamic occurred with the European gasoil contract. Further analysis reveals that a significant portion of this flow came from hedge funds and money managers.
As news of possible progress on peace talks between the U.S., Ukraine and Russia started to filter into the news, open interest and price both started declining sharply. This suggests that many of the recently added speculative long positions have been liquidated as Fund managers have shifted their short-term view of the market.
If the ‘fast money’ induced spike/collapse in price has now run its course, a good indicator for the next phase of market activity may be when open interest once again starts to increase. If this occurs as price continues to move down, then a re-test down to the $2.10 – $2.20 range on front-month diesel futures is possible. If open interest starts to build alongside higher prices, then the familiar $2.40 level comes back into play.
Supply/Demand Balances
Supply/demand data in the United States for the week ended November 14, 2025 were released by the Energy Information Administration.
Total commercial stocks of petroleum decreased (⬇) 2.7 million barrels to 1.2692 billion barrels during the week ended November 14th, 2025.
Commercial crude oil supplies in the United States were lower (⬇) by 3.4 million barrels from the previous report week to 424.2 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Up (⬆) 0.1 million barrels to 8.4 million barrels
PADD 2: Down (⬇) 1.8 million barrels to 102.1 million barrels
PADD 3: Down (⬇) 2.0 million barrels to 241.3 million barrels
PADD 4: Up (⬆) 0.1 million barrels to 24.6 million barrels
PADD 5: Up (⬆) 0.2 million barrels to 47.7 million barrels
Cushing, Oklahoma, inventories were down (⬇) 0.7 million barrels to 21.8 million barrels.
Domestic crude oil production decreased (⬇) 28,000 barrels per day from the previous report to 13.834 million barrels per day.
Crude oil imports averaged 5.950 million barrels per day, a daily increase (⬆) of 729,000 barrels. Exports increased (⬆) 1,342,000 barrels daily to 4.158 million barrels per day.
Refineries used 90.0% of capacity; an increase (⬆) of 0.6% from the previous report week.
Crude oil inputs to refineries increased (⬆) 259,000 barrels daily; there were 16.232 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, increased (⬆) 105,000 barrels daily to 16.343 million barrels daily.
Total petroleum product inventories increased (⬆) by 0.7 million barrels from the previous report week, up to 845.0 million barrels.
Total product demand decreased (⬇) 613,000 barrels daily to 20.157 million barrels per day.
Gasoline stocks decreased (⬆) 2.3 million barrels from the previous report week; total stocks are 207.4 million barrels.
Demand for gasoline decreased (⬇) 500,000 barrels per day to 8.528 million barrels per day.
Distillate fuel oil stocks increased (⬆) 0.2 million barrels from the previous report week; distillate stocks are at 111.1 million barrels. EIA reported national distillate demand at 3.882 million barrels per day during the report week, a decrease (⬇) of 136,000 barrels daily.
Propane stocks unchanged (=) at 105.4 million barrels. The report estimated current demand at 1,122,000 barrels per day, a decrease (⬇) of 36,000 barrels daily from the previous report week.
Natural Gas
The Federal Reserve recently hosted a conference on Energy and the Economy. Industry speakers including an executive from Cheniere advanced some interesting analyses. While perhaps speaking in support of their own self-interests, the numbers are still important to consider. The chief commercial officer at Cheniere pointed out that at
the end of 2022 global LNG demand was roughly 390 million tons (Mt). By the end of 2025, this level stands at 420 Mt. The four-year gain of 30 Mt is expected to be the ‘new normal’ growth rate.
According to the EIA:
- Net withdrawals from storage totaled 14 Bcf for the week ended November 14, compared with the five-year (2020–24) average net injections of 12 Bcf and last year’s net injections of 3 Bcf during the same week. Working natural gas stocks totaled 3,946 Bcf, which is 146 Bcf (4%) more than the five-year average and 23 Bcf (1%) lower than last year at this time. This net withdrawal was the first for the Lower 48 states in the 2025–26 winter heating season.
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