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So much for Monday’s oil rally. This morning, a day after Russia and Saudi Arabia succeeded in talking up oil prices with promises that OPEC and allied non-OPEC producers would extend the current production cuts past their June expiration until the end of 2017, U.S. benchmark West Texas Intermediate is down 0.8% to $46.06 a barrel and international benchmark Brent crude is off 0.81% to $48.94 a barrel as of noon New York time.

To me it looks like oil prices ares being driven by speculative trades by hedge funds looking to, first, avoid another tumble in oil and, second, to position themselves for another rally once oil falls to near the bottom of the recent trading range.

On Thursday of last week, for example, oil prices fell on worries that cuts by producers in the Organization of Petroleum Exporting Countries were failing to reduce the global oversupply of oil in the face of rising production from U.S.oil shale companies. That led to a huge day on Friday in the options market with, according to Bloomberg, about $7 million in options bets set to pay off if West Texas Intermediate falls below $39 a barrel by mid-July.

Hedge funds decreased their net-long position in West Texas Intermediate to a scant 203,104 futures and options in the week ended May 2, data from the Commodities Futures Trading Commission. Long positions decreased by 7% and short positions jumped by 37%. And that follows on a 26% jump in short positions in the prior week. In London the net-long position in Brent crude fell to 322,557 contracts, the lowest since November, according to data from ICE Futures Europe.

The big jump in short positions provides fuel for a potential rally in oil when sentiment shifts in the other direction and shorts are forced to buy to cover their positions.

The questions are

1) Is there an event or press conference that could shift sentiment? The obvious choice is the OPEC meeting on May 25 that will decide on whether or not to extend production cuts. (I think an extension is just about certain.) Look for rhetoric about an extension from OPEC and non-OPEC producers in the days leading up to the meeting and the likely agreement. I think there’s a good chance that the current short positioning by hedge funds is a set up before going long ahead of the meeting.

2) Where is the turning price in the current market? Betting for a bottom looks concentrated at $45 a barrel and again at $39 a barrel.

If you own actual shares of oil producers (as opposed to options or futures), especially if they are shares of U.S. oil shale producers, I wouldn’t sell into this dip. Ride it out or if prices get attractive enough on the downside, add to positions.