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Highlighted below are next year's oil contracts and the open interest for each. With prices plummeting the way they are, we are seeing increased hedging using the June and December contracts for 2009. One potential impactor that has not received enough attention is the huge increase in ETF activity. Across the board volumes for ETFs have risen, and oil is not excluded.

Looking at USO alone, shares outstanding have risen 215% since 11/28/08, and the 50-day average volume on the fund is up almost 50% in the same period. Increased activity in ETFs could well be the culprit for the increased volatility in front month oil contracts on the day of expiration.

click to enlarge


Oil futures open interest

Source: Plummeting Oil Prices Increases Hedging for 2009 Contracts