Money Managers Find Favor in Oil

By Brad Zigler

Real-time Monetary Inflation (last 12 months): 3.8%

For most of this year, money managers have been middling buyers of crude oil futures. Overall, the disposition of the funds toward petroleum has been—how shall I put it?—cautiously bullish.

That was, at least, the case until this month. In October, the spark was set to the funds' tinder. Funds are now more bullish than they've been over the last three years. Yes, even more bullish than last year when crude prices raced above the $140 level.

At the high, er, water mark last summer, two thirds of funds' oil positions were long. Now, more than 82% are. Not as bullish as fund runners' positions in gold and silver, mind you—there they lean 99% and 97%, respectively, on the long side—but big nonetheless (click to enlarge).

Money Managers' Long Exposure To Crude Oil

Fund runners, too, hold the largest net interest in the crude oil market, even larger than producers and commercial users. The funds are now the only trading block holding a net long position: Commercials are short; swap dealers are short and noninstitutional traders are short.

That was pretty much the market makeup last spring, ahead of the market's peak. The question traders are asking themselves now is this: How long before the peak this time?

Comments

[Daniel Moser:]

You know what I find most interesting about this particular article? According to this analysis the "big bad energy speculators" are longer than ever in the market, yet somehow prices managed to stay below $140/bbl. How in the world can that be? I was so sure that speculation was what drove oil prices to $140 per barrel. Is it truly possible that supply and demand might actually have something to do with the price of oil? I digress...

Thank you for the update on the position of market players. Now if only policy makers will focus on fixing the problems rather than playing idiotic blame games that clearly lack insufficient evidence supporting their claims.

Nov 02 10:03 PM

[StockMaster...:]

Someone said something today that seemed simple enough regarding the price of oil: People don't want to own dollars so they own oil instead. If you are going to take it off their hands you are going to have to pay more than they bought it for, maybe a lot more. Speculation? Looks like the new currency in a lot of ways. This will keep oil above its fundamental supply/demand level going forward. Check the price of oil the last time the dow was at this level years ago. Fundamental shift here.

I'd go long SSL and BP here because they offer the oil exposure and the explosive growth in nat gas and alternatives during a spike in oil if we try to get off oil one day. 4-6% dividends for both is $ in the bank.

Short term oil could go to $75 I'd load it up there.

Nov 03 12:15 AM

[G. L. Turner:]

Moser - they are poised, in a low stance, just waiting until Gov. Sachs says: "Go! Its time for $110 Oil, then a month later - $120!"...except, mayber they are just holding tight to see if GC pulls another one on then last last July and goes (oops, let's short it!).

With that much money in there, it's a very big time bomb waiting to go off, either direction...jsut a question to see who wins, the hedggies are the MASTERS of GREED!

Nov 03 10:47 PM