The price of oil has jumped more than 50% since hitting a 12-year low in February, on hopes of production freezes that could reduce the global supply glut. But there is good reason to believe the market is getting ahead of itself. Little has changed in the oil supply picture to merit this price rebound. In fact, several signs suggest there could actually be even more supply over the next few months. Another plunge in oil prices would not just drag down companies in the space, but likely the entire market, which is why I want to have… Read More
The price of oil has jumped more than 50% since hitting a 12-year low in February, on hopes of production freezes that could reduce the global supply glut. But there is good reason to believe the market is getting ahead of itself. Little has changed in the oil supply picture to merit this price rebound. In fact, several signs suggest there could actually be even more supply over the next few months. Another plunge in oil prices would not just drag down companies in the space, but likely the entire market, which is why I want to have some protection in place. Oil Rally Not Driven By Fundamentals The problem with the recent run in oil prices is that it hasn’t been driven by fundamentals; it’s been driven by speculation and trading. We have seen massive short covering in oil futures. Data from the Commodity Futures Trading Commission (CFTC) shows investors increased net-long positions by 17% in the week ending March 15 to the highest level since June. But once weak fundamentals come back into focus, the market may not be so positive. #-ad_banner-# For starters, the Saudi-Russian agreement to freeze production at current levels may not… Read More