Kettera Strategies' Heat Map for February 2021
Systematic Trend Followers in Energy Sector Show Selective Strength Amid Volatility
In the world of commodities trading, systematic trend followers have faced a rollercoaster ride over the past few months, particularly in the energy sector. The second quarter of 2025 was particularly challenging, with natural gas, heating oil, and copper causing headaches for trend followers due to volatility and geopolitical events.
However, there have been signs of stabilization recently. In June 2025, systematic trend-following CTAs found support in profitable trends mainly in currencies and stock indices, despite suffering losses in energy markets due to reversals. Faster trend-following strategies with allocations to stock indices and currencies outperformed, but energy exposures dragged performance, with some losses from short oil positions noted.
The situation improved in early August 2025, as energy showed selective strength, especially crude oil. This partial resilience stood out relative to metals and soft commodities, which experienced violent unwindings. Despite the high volatility and broad commodity weakness, crude oil demonstrated a degree of resilience that was noteworthy.
Managed Futures, often representing trend-following strategies, demonstrated a continued stabilization with gains in July 2025 (+0.34%), marking the second consecutive positive month after a difficult first half. Despite this improvement, Managed Futures remained down roughly -7.3% year-to-date. This suggests that trend followers are starting to adapt better to recent market dynamics, with energies being part of this gradual recovery pattern.
Energy traders performed well, especially those with long exposures to crude and refined products markets. Short Term strategies were positive overall in February, with several key markets experiencing volatility breakouts. Those nimble enough to short rates and bonds in the last week of February booked outsized returns.
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In conclusion, systematic trend followers in the energy sector have encountered volatility and frequent reversals over recent months, leading to a mixed performance with losses in certain energy commodities (natural gas, heating oil), but crude oil showed some selective strength lately. The environment remains fragmented and challenging, but trend-following exposure management and adaptive strategies are helping mitigate losses as the third quarter progresses.
Investors looking to explore opportunities in the energy sector may find appeal in trend-following strategies, given the selective strength demonstrated by crude oil recently amid the challenging environment. Despite the ongoing volatility, these strategies could potentially provide a more resilient investment approach, especially in managing losses in other energy commodities.
Investing in technology, such as algorithmic trading systems, could further enhance the performance of trend-following strategies by providing faster reaction times and increases in overall efficiency. As the market dynamics continue to evolve, trend-followers will need to leverage innovative solutions to stay ahead in the rapidly changing financial landscape.
