After suffering losses for the second consecutive year, algorithmic traders dominating the Crude Oil Product market are pulling back from this Commodity.

According to the Bridgeton Research Group, which provides computer-generated trading analysis, the so-called Commodity Trading Advisors (CTA) – a type of trend-following algorithmic trader – experienced consecutive annual losses for the first time in over a decade last year.

As losses continue to mount, some companies have begun to reduce their risk exposure in the Crude Oil Product market, thereby diminishing their influence on this market. This will allow traders who focus more on supply and demand balance to regain dominance and normalize the daily price trends in the Futures market.

Rebecca Babin, senior energy trader at the Canadian Imperial Bank of Commerce Private Wealth Group, stated, 'In 2024, humans are indeed more successful than algorithms, which is different from previous years.'

Babin indicated that the CTA has currently reduced the weight of Crude Oil Product in its portfolio to 2%, down from 4% in July 2024, which has weakened their influence on market trends and reduced their share in open positions.

Since the COVID-19 pandemic, this type of trend-following CTA has gradually dominated daily trading of Crude Oil Futures. Due to its trading method, it has intensified bidirectional fluctuations and posed greater challenges for traders with physical exposure in navigating the market. However, in 2024, crude oil prices are trapped in the narrowest annual price Range since 2019, suppressing volatility and causing the market to lose the continuous trend that typical CTAs rely on.

Analysts say that the escalation of geopolitical tensions in the Middle East over the past two years has led to severe price fluctuations and is one of the reasons for the CTA's retreat. Therefore, according to Bridgton's data, in 2024 (except for six weeks), CTAs have been changing their Hold Positions in Brent Crude Oil every week. The duration of maintaining the same Hold Positions lasted only six weeks, the least since the outbreak of the pandemic.

Nevertheless, some companies still believe that returns from Other markets like Stocks can help them withstand pressure and continue to hope that their algorithmic trading will eventually bring profits in the crude oil sector.

Dmitry Sukhanov, CEO of Lime FinTech LLC's proprietary trading project Limex Quantum, manages such a diversified algorithmic trading system. Although his crude oil algorithms incurred losses in last year's narrow price Range, they ultimately accounted for only a single-digit portion of his overall portfolio, which also includes positive performance from stock indices.

Sukhanov stated, "Seeing an overall portfolio or its components perform poorly is inevitable in systematic investing," adding that some CTAs may adopt a low profile as they utilize longer historical time series to optimize their strategies.

Moreover, hope is on the horizon. Daniel Ghali, a commodity strategist at TD Securities, suggests that President-elect Trump's trade policies may lead to a rebound in inflation, which could increase macroeconomic volatility and stimulate oil trading activity, including trades from CTAs.

Babbin stated: "The key question is whether CTAs will increase the weight of Crude Oil Product and refined oil in their models, which could potentially shift the portfolio's focus away from Other Assets. If this is indeed the case, it could indicate that this group has regained a greater influence in the market."