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The smart money is convinced: Oil prices are headed higher, regardless of the pressure President Trump recently applied to OPEC.
John Kemp, public policy specialist and energy analyst, used this chart to illustrate how hedge-fund managers have never been this bullish on oil:
HEDGE FUNDS and other money managers hold 15 long positions for every short position in Brent+WTI -- the most lopsided positioning on record pic.twitter.com/M6JEdxkS7y
— John Kemp (@JKempEnergy) April 23, 2018
Crude was off slightly on Monday, while the Dow and the S&P were stuck in flat territory.
Last week, oil shook off Trump-induced weakness, after the president took to Twitter to blame OPEC for “artificially high” prices:
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
Regardless, May West Texas Intermediate crude hit a 3 ½-year high earlier in the week and ended the stretch 1.5% higher.
OPEC ministers responded to Trump’s tweet, with Saudi’s Khalid al-Falih saying there’s “not such a thing as artificial prices,” according to Bloomberg.
“There are plenty of reasons to be bullish about oil, including rapid growth in global oil consumption, continued supply restraint by OPEC, falling output in Venezuela and the possible re-imposition of sanctions on Iran,” Kemp wrote in a piece for Reuters.
He pointed out that, in the past, lopsided positioning like we’re seeing now has often led to swift reversals in price, but that might not be the case here.
“This time around few portfolio managers seem to be worried,” Kemp said. “Most seem convinced fundamentals will drive prices higher and eventually allow them to liquidate their long positions into a rising rather than a falling market.”