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Wouldn't touch oil with a 10 foot pole right now. Inventory is staying high and rig count keeps going up, the second oil hits $60+ it's going to get drowned back down immediately as producers uncap all of the wells they are currently drilling and capping. The oil industry is in a cannibalistic cycle that only explosive economic growth somewhere, anywhere in the world, can get it out of at this point - and that's a whole separate issue in and of itself. There's a big hole to climb out of in the years to come.
It took only a $5 drop in oil to reduce the record long position. The working off of the excess bullishness, the end of weak seasonality, and the relatively high US dollar doesn't support a large drop in crude oil for the near future.
Oil sector is not participating in the rally at all. The worst sectors are often the last to rally before the market tops. Not a recommendation.
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The rally in oil prices between March 27 and April 12 was driven by short-covering as much as the establishment of fresh long positions.
But most of those short positions had been closed out by April 11 and certainly by April 18 limiting further upward price momentum.
By April 18, hedge funds had reduced short positions in NYMEX WTI to just 63 million barrels, down from a peak of 117 million barrels three weeks earlier (tmsnrt.rs/2pXkezz).
Inverted chart shows short positions have been pared back to near the lows
In a decade when we come up for air, oil won't matter much as newly installed wind and solar were the biggest additions to both China and the USA (and much of Europe).
Sure, we will need it for jet fuel and some other markets but there will be an oversupply virtually forever. Oil and plastics can now be made from plants......corn and even other stuff (waste).
The Age of Oil is over. Even the Age of Natural Gas is Over. It just takes a while to die...think of it like IBM and Personal Computers. They are dead, but still plodding along.
I made - and lost - a lot in Energy. No more energy for me. In the end, energy is going to be close to free.
As another poster indicated - my mistake was this - thinking "Well, for $2. how else can you push a 2 ton car 30 miles down the highway?". Crude, but makes sense. But when Tesla can push the car 5X that far the formula changes.
The future is electric and i'm not even going to invest in that (although I made some small sums on Tesla).
A lot of the offshore drillers (ATW, DO, ESV, NE, PDS, RDC, RIG, SDRL) are already plumbing new lows. Seadrill (SDRL) may be nearing bankruptcy. Even a contract land-driller, such as PTEN, has started to roll over.
Government shutdown seems to be averted. Some very misleading news refers to it as a debt limit bill, but it has nothing to do with extending the government's borrowing authority.
Chart of US oil production recovery vs. crude oil has been making the rounds for a week. It was originally in a Bloomberg article. At present trend, production will hit new highs this year.
I made a lot of money investing in oil stocks in 2016, but sold all of my positions by late summer. I have since been trying to find reasons to get back in, since oil prices are so cheap. But the industry fundamentals are so horrible that I can't do it. My gut tells me that oil prices will rebound eventually, but 2017 is not the year. The supply-demand equilibrium that most analysts predict is coming never comes.
Another head wind for oil prices is interest rates. Every time the Fed raises rates it makes oil cheaper relatively speaking. We are poised for multiple rate hikes later this year and FED unwinding the balance sheet. This means a stronger dollar which means each dollar buys more oil.
Yes. There was a WSJ article yesterday on interest rates and fracking. 2 percentage points would wipe out all gains from efficiencies. The following report summarizes all the news.
The price of oil often coincides with changes in hedge fund positions. Friday indicated that the selloff had washed out for now.
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