The debt contraction at work. The only thing the oil market has going for it right now is that many speculators are bearish, and when too many people are on the same side of the boat, it tips over. However, the long-term outlook for oil is getting increasingly ugly (see “Blood, Oil, Debt and Government,” SLL, 10/26/15). From Dan Murtaugh at bloomberg.com:
Money managers increase bearish wagers by most since July
U.S. crude supplies have gained 5% in past four weeks
Hedge funds placed the most bets on falling oil prices since July as rising piles of crude dashed hopes of a near-term recovery.
Money managers’ short position in West Texas Intermediate crude jumped by 18 percent in the week ended Oct. 20, the largest surge since July 21, according to data from the Commodity Futures Trading Commission. That pulled their net-long position down by more than 16,000 contracts of futures and options.
Crude stockpiles in the U.S. rose 22.6 million barrels in the past four weeks to the highest October level since 1930, even as producers have idled more than half their drilling rigs in the past year. A global surplus of crude could last through 2016, according to the International Energy Agency.
“The decline in U.S. drilling and production is not enough to rebalance even the U.S. market, let alone the global market,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “How much do you really want to pay for the next million barrels of inventory you don’t need?”
WTI fell 2.4 percent in the report week to $45.55 a barrel on the New York Mercantile Exchange. The front-month contract dropped 1.4 percent to settle at $43.98 a barrel on Monday.
To continue reading: Oil Speculators Make ‘Easy’ Bearish Call
