I wrote this in February:
‘Fund managers now have the most bullish view on oil since the first half of 2014, when Libya’s exports were nearly halted by civil war and Islamic State fighters were racing across northern Iraq….Fund managers have been able to increase their bullish bets with almost no disturbance to the market price of crude. Volatility has been most remarkable by its absence.’
Are hedge-fund managers a bit like bookies? They survive because they know what’s happening and what is likely to happen? Oil prices have been steady at $55 per barrel and have stayed there despite the increased investment by hedge-funds. As I understand it from the article, when hedge-fund managers get too bullish then prices often fall but this time they’re holding.
After a few months falling just below $50 per barrel prices are holding at levels profitable to the more efficient producers and the hedge fund managers are investing the most they have since February. This along with many other longer-term indicators of imminent shortages suggest North Sea Oil remains of great value: