Crude oil and those speculators

COT data

Looking at the Disaggregated COT, we see Managed Money adding to their net longs from 152,065 on the Dec. 3 report to 191,171 net longs this past Friday, adding 39,106 contracts net long. Producers (True Commercials) went from being net short 136,630 contracts to net short 149,334 contracts, adding 12,704 contracts net short. And the Swap Dealers, who were net long for a long time (see the weekly chart below), went from net short 35,965 contracts to 51,150 contracts net short, adding 15,185 contracts net short. Combined that is 66, 995 contracts added to OI. The $90 area will be a good test to see if crude can break through. My only question is with the swaps and their net shorts? Keep an eye on these guys as they are normally speculators in this market, not hedgers. We will have to see how this plays out.

Commercial Net Tracker instructions:
This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A. If the current value is at a 12-month low, the cell will display a red/burgundy background. B. If the current value is at a 12-month high, the cell will display a green background. C. If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D. If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

Proceed to Page 3 for this week's detailed fundementals charts...

Fundamentals

Crude oil prices rallied to a 26-month high of $90.76 a barrel and have now retraced just over half (51%) of the two-year plunge from the July 2008 all-time high of $147.27 to the 6-1/2 year low of $32.40 in December 2008.

Bullish factors include:

1. The rally in global equity markets which improves confidence in the economic outlook and energy demand.
2. The larger-than-expected decline in weekly crude oil inventories (-3.82 million bbl vs. expectations of -1.5 million bbl).
3. The DOE’s hike in its crude oil price estimate for 2011 to $86.08 a barrel from last month's forecast of $85.17, along with its 80,000 bpd hike in U.S. oil consumption forecast for 2011 to 19.24 million bpd from last month's forecast.

Bearish factors include:

1. A possible imminent interest rate hike by China, which may slow its energy demand (DID NOT HAPPEN THIS WEEKEND).
2. The unexpected increase in weekly gasoline and distillate supplies (gasoline +3.81 million bbl vs. expectations of a -300,000 bbl draw and distillates +2.15 million bbl vs. expectations of -900,000 bbl).

Fundamental Outlook — Medium-term bullish — Crude oil prices rallied to new highs and the medium-term outlook is bullish on increased confidence in the global economic outlook and energy demand combined with the recent decline in U.S. petroleum inventories. Prices came off their highs, however, due to the unexpected increase in weekly gasoline inventories and the ongoing European debt crisis. Despite the high levels of crude oil and product inventories, OPEC kept its production quotas unchanged when the cartel met on Dec. 11. OPEC members appear to be fully on board with an upward revision in crude oil’s trading range now that the global economy is in better shape.