Technical & Fundamental Oil Reports Specialists

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Trust the supply/demand balance, the numbers are very bearish

Published Friday, December 11th, 2015

Short and oil have become synonymous. The weekly reports published by the CFTC and ICE on net speculative length (NSL) and its composition show a record high level of combined WTI and Brent gross shorts of 359 million bbls. It’s the same story with equities. Short selling in the S&P 500 energy sector is at or approaching record highs with 5.2% of sector shares on loan compared to 2.8% for the S&P overall and compared to 2.5% for the same period last year.

The high level of shorts is just about the only straw oil bulls have left to grasp hold of. They cannot claim that we are witnessing a panicky sell off that will reverse quickly. That was the story in 2008 but not the story in 2105. The fall from $147.50 to $36.25 bbl on Brent in 2008 took six months. The fall from $115.71 to last night’s $39.73 bbl has taken 18 months. The current fall has a firm basis in fundamentals and has been both relentless and considered.

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Posted by David Hufton