Ok, so it probably doesn’t say anything good about sentiment when money managers just cut their net long position in Brent and WTI to the least bullish in nearly 11 months.
It also doesn’t say much for sentiment when short-only positions just rose 48,661 lots to 377,891, the highest in almost 11 months.
According to CFTC data, the ratio of long to short positions is now roughly 2:1, versus 12:1 in February.
“The bears are not going into hibernation yet. They’re still hungry,” Rob Thummel, portfolio manager at Tortoise Capital Advisors LLC in Lakewood, Kansas, which manages about $16 billion in energy-related investments, told Bloomberg.
“Further money manager long liquidation and fresh gross shorts, both in prompt futures and deferred structure, accelerated the move lower in prices albeit we think the lows are near and would position for upside in 2H’17,” Citi wrote, in a note out earlier today.
Right. “Position for upside.” Good luck with that.
Sarcasm aside, positioning has been something of a contrarian indicator this year – albeit in the wrong direction.
Don’t forget this hilarious juxtaposition from March which shows how specs got caught woefully offsides and ended up getting hosed like a fat girl trying to swing on a log that couldn’t hold her weight:
Are all those Treasury shorts going to learn anything from everyone who was massively long crude?.. pic.twitter.com/4BNbFDzRKy
— Heisenberg Report (@heisenbergrpt) March 10, 2017
But if there is indeed something to be said for contrarian indicators, then perhaps oil bulls can take some comfort in the fact that journalists are spending a whole lot of time talking about the crude bear market lately.
That’s a development which, as you can see from the following chart, usually presages a rally:
“Journalists (including myself) are writing lots of bearish headlines — is that a sign that oil is about to rally?” Bloomberg’s Chief Energy Correspondent Javier Blas jokingly asked in a Monday Twitter post.
There you go folks.
That’s what’s left of the bull case for crude. The contrarian journo trade.
****
The big consensus is accelerating GDP growth globally. And it is put forth by economists and a derivative optimistic mood. It seems to me that the largest market in the world knows better. And….oil should correlate with lower rates. Couple that with big denial about the China situation and a FED remorseful of becoming a backstop for PE expansion, and the outcomes seem predictable. And maybe the FED sees a bursting equity bubble as being psychologically alleviated by a FED that can ease. And maybe all that is psychology anyway? So let’s “normalize” rates to ease when the inevitable comes, and just maybe people will have confidence in the incredible FED rather than one that lost credibility. The fix? Concentration of wealth is alleviated by an every 50 year or so wealth tax. Nothing is ever easy. The fix will never happen.