The hedge fund pattern and oil

The hedge fund pattern and oil

The hedge funds have a heavy influence on the oil prices. The price battle in the oil industry during the month of March was driven by the hedge fund giants. The hedge funds and other managers related to money have affected around 209 million barrels of oil pricing through WTI-linked futures.  Hedge funds reduced their shorts to 93 million from 116 million barrel during the seven-week period ranging from March to May. This points out sharp 55 percent decline. The U.S. Commodity Futures 
Trading Commission (CFTC) released data regarding the hedge funds transactions. During the similar time frame, hedge funds increased new longs merely by 2 percent (7 million barrels).  The net new longs were 381 million and now it is at 388 million. This pattern of the hedge fund exactly matches the time frame when the oil prices increased from $42 per barrel (lowest in March) to $62.50 per barrel (a highest on May 6).  The prices have increased by 50 percent almost. 
 Now the sharp growth period in crude oil is slowing down, therefore we have very options in the market to buy back.  The speculative buyers are largely wrong because they are paying high prices on the stock even when the prices are falling down.  The community responded exactly the opposite during June 2014 when WTI long position of 451 million barrels projected already high prices, but no one bought it.  The betting against the common market pattern and projecting price will reduce the mean by a small margin and that means chances of earning will increase with relatively low risk. 

 

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