An article on Bloomberg.com this morning highlights most of the issues I discussed in yesterday's post: Hedge Funds with historic levels of long positions; OPEC's attempt to rein in supply; prices stuck in a range of $53 +/- $2--something's got to give!
The hope of the speculative long positions is that the production cuts will balance current supply with current demand; however, if supply is not curtailed significantly enough to start a draw down on the glut of inventory, then the overhang will persist, keeping a lid on prices for the next year. And, even if prices are pushed up higher, US producers will jump in quick, adding new rigs and simultaneously selling futures to hedge production for the next year. There simply isn't a sufficient basis of support for the bulls in the short run.
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