From Heinz:
Tuesday, October 19, 2004
crude oil, addendum 2
it's incredible...but we keep hearing that the rise in crude oil prices is all the work of 'evil speculators', right?
well, the total net speculative long position in NYMEX crude is a mere 5,000 contracts right now - that's right, out of open interest of 735,000 contracts, the funds hold a net long position of about 25,000 contracts, while the small speculators are now short a massive (for this category) 20,000 contracts net - making a total of 5,000 speculative net longs.
compared to the contract's history, there's ample room for this position to grow - and i believe the speculative shorts WILL get killed before it's over.
that said, when a contract price has moved into 'nosebleed' territory far above its various moving averages, you often get brief, but sharp corrections regardless of the net positioning of speculators.
but the contrarian expectation from the positioning data alone should be that prices will go parabolic at some stage.
in this context, note that the polyannas, including Greenspan, all hold fast to the opinion that high oil prices 'don't matter' and can neither harm the economy nor the stock market.
this complacency is very disturbing, especially as corporate insiders continue unabated with their recent record net selling spree of stocks.
my conclusion is that crude oil prices will rise UNTIL someone on Wall Street actually notices that this might be a bad thing for consumer spending as well as corporate profit margins. yes, yes....it IS a bad thing....it DOES matter.
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