Peak Oil Optimism [United States Oil Fund LP (ETF), VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return]

oil etfsTyler Durden: Speculative bets on rising Brent crude oil prices reached a new record last week but under the surface futures and options market positioning among managed money accounts is flashing a very red warning signal.

As Saxobank’s Ole Hanson notes, the long/short ratio has reached 6.4 meaning that for each lot of shorts more than 6 lots are long.

Historically, this looks extreme and on three previous occasions since early 2013 a reading above 6 subsequently triggered sell-offs of which the most recent was last June when the price peaked at $115.



While the focus remains on geopolitical worries the speculative data are pointing to an increased risk of a setback.
A gross long of 322 million barrels only requires a small change in the fundamental or technical picture to turn into a rout.

Speculative position in Brent Crude

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Shortly after this note, it appears Goldman also sees the same thing.

Goldman strategists John Marshall and Katherine Fogertey, in note, say have seen evidence from option markets that energy/oil positioning has “moved overly bullish in recent days.”

Investors willing to pay increasingly high prices for calls relative to puts, citing decline in put-call skew.

Sees shift as “sharp contrast” vs overly bearish positioning from March 18.

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Trade accordingly.

This article is brought to you courtesy of Tyler Durden From Zero Hedge.

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