There are two kinds of bets on the oil market: the speculators and the commercials.
The speculators are betting, in unprecedented numbers, that the rally in oil prices is going to continue and push towards $60, and the commercials who represent oil traders of producers and refiners are not nearly so bullish.
And that is where the anomaly lies.
The positions of hedge funds or speculators betting on higher prices are more than when oil was over US $100 in summer 2014, whereas commercials remain unconvinced that prices are moving higher.
According to this morning’s Globeinvestor, the combination of extreme bullishness in futures markets and a flat or weaker commodity price is likely unsustainable.
Without a sharp jump in oil prices, speculators will be increasingly motivated to throw in the towel and dump their positions sending the commodity price lower, and maybe even much lower.