Yeah, I’m looking at you, Mr. Short-Seller. Hedge funds currently sit on a record number of short WTI Futures. Prices fell yesterday after an unnamed source in Russia claimed that the country would not support any further cuts or extensions to the current OPEC voluntary production cutbacks.
Over a year ago I wrote about a gasoline glut as the primary driver of oil futures prices. Subsequent data proved me correct. Well, the worm has turned. The moving hand, having writ, moves on.
This is not normal. Gasoline stocks should be rising during peak driving season. Yesterday’s holiday-delayed API showed an abysmal -5.7 million barrel drop in gasoline supply. Some blame can be laid at the tropical storm that passed through the Gukf of Mexico, but in truth the effects of the storm were minimal.
We will need confirmation from EIA today as we all know that the API report cannot be trusted. Expectation for crude is -1.6 million barrels. For now, futures are up 1.7% heading into the opening bell.
Another bullish report from EIA, coupled with another drop in the number of active drilling rigs on Friday, can easily push crude oil back towards the magic $50 price point.
Let the squeeze begin.
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Can any report (in general) and even the EIA in particular be trusted these days? This is not a rhetorical question. How does one know with so much mis-allocation and stupid capex decisions out there due to 0% or near negative interest rates distorting market signaling mechanism?
Well, hell, that can be applied to everything in the investing universe! I direct you to Herr Fly’s own description of himself: “18 years in Wall Street, left after finding out it was all horseshit. “