WEST TEXAS – Now that the US-China trade war is coming in a truce and a slowdown in shale drilling has been detected, the hedge-fund managers are now placing their bets saying that in the fastest of 16 months, there would be a drop of the crude.
According to the data released last Friday, the oil short-sellers are slashing their bearish positions on the West Texas Intermediate crude of 41 percent for this week, ending on November 12.
Since the first week of October, there has been a 10 percent oil rebound, and since the oil short-sellers are heading to markets as buyers, they are deemed as contributors of the said rebound.
The commodity strategist of the TD Securities, Daniel Gali, says that there has been a considerable amount that can cover for the last week. And in the case of the latest optimism that they have seen, the trade file was fueled with much optimism. A most recent report also states that the shale patch cannot sustain the output profile anymore.
A shale slowdown can be seen coming due to the U.S. explorers trying to pump the crude, and now drilling has dropped to its lowest level for over two years. Numerous companies are now pressured to cut their spending, and many of them are having issues with finances.
Also, the fact that the United States is signaling a truce of the trade war with China, Larry Kudlow, the White House economic adviser, said last Thursday that the trade negotiations are now approaching its final phases. The WTI marked an end to the week with a $57.72 a barrel, considered as the highest in over two months.
According to the data of the U.S. Commodity Futures Trading Commission, the difference between bearish and bullish bets, there has been a 3 percent increase to 153, 174 futures. The massive bullish stance was because of the short-selling slump.
This indicates that the price rebound will not last for a long time, especially now that there are still issues with regards to the global economy and its supply influxes from Guyana and Brazil.
As of today, it seems like the world will still demand more oil. Andy Hall, the legendary oil trader, is now joining the International Energy Agency that works by predicting the oil demands for the decade. This organization also helps in forecasting the growth rate of oil for the next 5 years.
Bill O’Grady, the Confluence Investment Management LLC’s chief market strategist, said that it would be challenging to be a long-term bullish. There are lots of oil coming up in the virtual world. And if the price is not going to change, then they will need a lot of support from the OPEC.