Technical & Fundamental Oil Reports Specialists

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Markets defy the wall of worry

Published Monday, April 27th, 2015

Two conferences on different sides of the Atlantic last week revealed major differences of opinion in the outlook for oil prices. An expert can be found to support any number between $35 bbl and $100 bbl, although they will be vague on timing and you can be sure it will be surrounded by caveats. As we commented on Friday there are a huge number of moving parts that make up the oil price formulae, many rational and predictable and many irrational. The famous Rumsfeld quote about knowns, known unknowns and unknown unknowns is very apposite when it comes to oil prices.

One group of people not lacking confidence are speculators who have been consistently increasing their net length exposure to oil since October last year, even as prices were falling. Money manager net length in WTI has increased by 100 million bbls and by over 200 million bbls on Brent. Brent NSL was already at an all-time high in the week ending April 14 and we expect to see another increase in the figures published today. An unusual feature of the accumulation of length has been that it has not been associated with a relentless price increase. Clearly not all speculators have been bullish as evidenced by the number of speculative shorts and there has also been hedging volume to provide sell side liquidity.

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Posted by David Hufton