From One Extreme To Another: Record Oil Shorts Are Now Record Oil Longs

Tyler Durden's picture

At the end of January, when looking at the positioning in the oil futures market, we warned that there is a a "Constant Short Squeeze Threat" because "Oil Shorts Are At All-Time Highs."

Everyone knows what happened next; for those who missed it we explained precisely two months later, following an epic surge in the price of oil, in: "It's Official: The Oil Surge Was Driven By The Biggest Short-Squeeze Ever."

In other words, just as we had warned, the oil trade so far in 2016 has been all about positioning - very extreme positioning at that -  and the sparking of a historic short squeeze in oil.

We bring this up because less than three months following our warning about a "constant oil short squeeze", it is time to unveil the next warning: one of a potentially big drop in the oil price as now record speculative oil longs proceed to cover on the other side, unleashing a selling scramble lower.

Is that possible?

Well, according to Deutsche Bank's latest investor positioning and flow report last night, "oil speculative net longs are at record highs as gross longs rose and shorts fell last week."

 

So just as the crowd has shifted quickly from one side of the boat to the other, the risk now is that all those who are long oil are forced to liquidate, and since there are virtally no shorts left to cover into any selling we fail to see what major catalysts will be able to prop up the price of oil if and when the sellin resumes, especially now that all OPEC "oil freeze" headlines are largely ignored, even the algos.

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max2205's picture

We Tap'd on the shoulder some folks

El Oregonian's picture

Let 'er FLOW!!!....er, wait. Dam it?

flacon's picture

Markets should be one buyer one seller no options in other words no derivatives. I do not understand the purpose of derivatives is there somebody here that could explain to me the derivative purpose and how that has made our economy better? I doubt it because I really don't think that derivative increase the price Discovery mechanism.

jldpc's picture

What are you a chronic complainer? Hmmmm

hxc's picture

Really dude? Markets are a calculation mechanism, who cares what financial tools people invent if they're voluntary?

Paul John Smith's picture

We are talking about organized crime - so it's about the scheme and not the "market fundamentals".

There are 2 basic scenarios:

1. They print money, got to NIRP everywhere, and apply helicopter money - that puts OIL at $200-$300 a barrel within 36 months (and then the crash in the economy that happense as a result - "rocky plateau").

2. The FED "normalizes" rates - oil crashes, temporarily. The marginal oil plays all fail, the excess capacity is gone within 3 years - 5 years from now, perhaps 7, we are back at $100/barrel (or more).

Long term - betting on oil appreciation, without limit, is betting on the collapse of civilization.

KnuckleDragger-X's picture

Betting on a sure thing is never a sure thing......

venturen's picture

Oh but for the laws of supply and demand.... Now it is just free money pump dump pump dump.....IMPLOSION! 

_ConanTheLibertarian_'s picture

So we've got a long squeeze coming up then. Squeeze me one more time baby!

Mr. Ed's picture

If most of those long contracts were OPEC-owned, it might get a little complicated.  Beware.

JamaicaJim's picture

BULLBEARISH!

 

OR...

 

BEARBULLISH!

 

OR

.............."TOTALLY FUCKING BOLLIXED UP LIKE TWO DOGS, LOCKED UP, IN THE STREET, FUCKIN" - Eddie Izzard

Stox's picture

Since the squeeze has become the only reliable trade, this is the most bearish data we've seen. Far more so than anything fundamental since fundamentals have been worthless information across all markets.

quadraspleen's picture

 

 

I've never gone long on oil. I claim my $5

south40_dreams's picture

Since central banks have shown they will prop this until their dying breath, it makes some sense to go long.  

MaxThrust's picture

@Flacon (Markets should be one buyer one seller no options in other words no derivatives.)

Agree 100%.

Ban short selling. If someone wants to go short they sell the stock they already own. This will really peeve The TBTF criminal syndicates.

MaxThrust's picture

A good example is gold. The price discover of gold should be what people are willing to pay for physical.

hxc's picture

Then buy some physical, Mr. Central Planner. Who cares what price a fake paper contract is?

inosent's picture

I don't like to be part of the crowd, and am not comfortable with the COT #s

The price action has placed us inside the old range with the 8/31/2015 high (daily). Current high JUN 2016 is 54. I got at least 49-50 on this move, not sure when we hit it, but any selling, esp under 2015 close is money. Once oil touches 50 in 2016, the trade is pretty much dead.

The only exception is whether or not these new COT#s are indicating the emergence of a trend reversal. Since the Weekly and Monthly still look pretty horrible, coming out of this hole will take a lot of work, but the 2016 spike low looks a lot like a planted low and I think we might be getting into this sort of thing where the players who got smoked and forced out on the sudden sell-off, then too shell shocked to react on the sudden move off the lows, well, they are hoping to God Almighty the prices careen lower to 'get back in'.

Good luck with that. If you're not in now from those once in a lifetime lows to make you f-g rich it's "too late baby now, it's too late".