Peak Oil Squeeze? Hedgies Capitulate On Bearish Oil Bets

Hedge Funds covered their short oil bets by the most in 11 months last week. CFTC data shows managed-money short positions dropped 25,639 contracts last week, sustaining a 26% rally off February lows. In April 2015, WTI rallied over 20% off its lows amid the same short-covering squeeze, only to collapse 40% in the next 3 months (despite OPEC hope and calls for stability). Oil ETF shorts have also capitulated back to "normal" long-short ratios suggesting oil has seen "peak" short-covering.

Futures shorts covering in size...

 

And Oil ETF Shorts have collapsed back to "norms"...

 

And while this degree of short-covering may be significant, we leave it to Tim Evans, an energy analyst at Citi Futures Perspective in New York, to remind traders of the 'reality' of the supply-demand imbalances...

"We might be starting to chip away at the surplus but have a long way to go before the market moves back into balance."