Slicker Than Snake Oil (by Trade Flight Plan)

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Irish whiskey, inventory levels, currency wars, and FOMC – whoopee!

Other than that, crude oil has been light, sweet, and volatile.  As a quick followup to our prior post, we continue to watch the net positions of commercial entities on CL (now trading the CLF1 contract).  Imagine our surprise when we see the commercials are actually increasing their net short positions to record levels based on the latest weekly Commitment of Traders (COT) info.  These are airlines, producers, transportation companies, and other big hedgers.

Same rules apply as last time:
Red=commercial traders, yellow=small spec traders, blue=large non-commercial traders.
Green vertical lines show relatively high COT readings by the commercials.  Red vertical lines show relatively low COT readings for these slick oil hedgers.

Just for kicks, we highlight with nice blue circles what happened previously when commercial net short positions hit new lows.


We cannot short at lows, and the snake oil salesmen haven't made it easy to get short, doing things like initiating the moves during Asian or European session hours at some crazy-o-clock in the middle of the night, blaming it on a supply disruption in Irish Whiskey as an excuse.  But boy, any micro bull intraday retracements sure look interesting, especially if we can get some confirmation on smaller intraday time periods.

Even if all else fails, oil bulls would have to believe that somehow, this time things will be different and nearly 200,000 oil contracts net short of the nastiest, slickest, smartest traders in this business are just kidding.  The best part is, an increase in the yellow line representing small speculators tells us that retail traders have been buying it.

Of course, in these markets anything is possible.  In October/early November they marked price up by nearly $5/barrel before selling off, just to prove they could.  The entire time, the commercials just kept establishing even larger net short positions.  Someone's either going to get taken to the cleaners or make a fortune.  Just stay alert if you're trading stuff based on oil, like USO, RIG, BP, XOM, etc.  If CL sells off, they stand to make a nice profit.  If not, end of year could get interesting.