Monday, March 14, 2016

U.S. Oil Producers Just Shorted The Oil Rally. Again.

In a repeat of last June, distressed U.S. oil producers shorted the oil rally, however, this time they shorted it $20 lower and in larger size...

Now they can sell twice - having shorted the futures market, they can continue to produce and saturate the spot market, which will prolong and exacerbate the glut...

ZH: Mar. 14, 2016
It's The Q2 2015 Rally Deja Vu

"The CFTC producer short position just reached new highs due to distressed producers being forced to hedge. "Many entered 2016 in an under-hedged position and want to avoid that for 2017"

"Producer hedging is rampant in the $40s [12 month]"

"Positioning data suggests that crude may be getting overbought. WTI and Brent combined net spec length has increased dramatically since late 2015 to the highest level since July 2015. ...This suggests that the market is positioned in a one-sided fashion, posing risk to the downside."

"The current rally mirrors this [Q2] period in 2015 in many ways, only that producers are willing to hedge at much lower levels."