The Great Oil Short Squeeze

Bert Dohmen

Investment & Economic Research

Contributor's Links: Dohmen Capital Research

Bert Dohmen is a serious analyst and a trader. You’ve probably seen him on national TV such as CNBC, Neil Cavuto’s show on FOXNEWS, CNN, or read his views in Barron’s, the Wall Street Journal, Investor’s Business Daily, Business Week, etc. He is a professional trader, investor, and analyst. As founder of Dohmen Capital Research , he has been giving his analysis and forecasts to traders and investors for over 40 years. What he notices in the markets in his own trading each day, he relays to his subscribers. Bert Dohmen looks behind the scenes of the global investment markets. He analyzes cross-market relationships, global correlations, and credit market data which give him superb clues as to what is likely to happen in various markets that are ignored by other analysts. Bert Dohmen has been called “a leading Fed Watcher” by the Wall Street Journal. Federal Reserve Board actions, world-wide politics and economies, along with fundamental and technical analysis give him the important clues. His degree was in chemistry, with minors in physics and math. Thus, reading charts was what he liked. He discovered technical chart analysis when he was at Graduate School at the university. He understood immediately why the different chart patterns in the markets worked. There was a simple logic that he loved. Thus he can predict a change in the price trend before the news is made public. Bert Dohmen’s analysis often goes totally contrary to accepted “Wall Street wisdom.” He is the original Fed Watcher. His predictions of Federal Reserve policy have been astounding. He considers Fed policy the most important fundamental factor. Bert Dohmen is the publisher of the WELLINGTON LETTER, an award-winning investment newsletter with an impressive 39 year record. He is also the author of the #1 best seller book “Prelude to Meltdown” and the latest “Financial Apocalypse” During 2007, Bert said: “You can prosper during the coming, devastating bear market. It will make the bear market of 2000-2002 look like a walk in the park.” “Buy and Hold” is dead! It was always stupid. The bursting of the technology and internet bubbles of 2000 caused the greatest stock market crash since 1929, erasing over $9 trillion of wealth. Yet our clients prospered. Yes, they made big profits. During the 2002-2007 bull market, our clients once again had the opportunities to make a fortune with Bert Dohmen’s advice. Many consider Bert Dohmen the “The Independent Market Authority.” That bull market top in the DJI was on October 11, 2007. What did Bert advice at that time? The Oct. 15 issue of our WELLINGTON LETTER had a subhead: “The Eye of the Hurricane.” It declared that the bull market top had been made. Wall Street didn’t declare the bear market until June 2008. Our clients were way ahead of the pack. During 2007, Bert Dohmen predicted that 2008 would see an immense global financial crisis, the worst since the 1930’s, brought on by all the shenanigans by Wall Street and the large banks. In fact, he felt so strongly he did something he never wanted to do: write a book. It was “PRELUDE TO MELTDOWN.” In the book, he predicted that the global financial system would go to a near-meltdown state in 2008. That forecast was widely disregarded, but Bert Dohmen was right. By early 2009, it was estimated that total wealth destruction globally was around a fantastic $64 TRILLION. That’s almost five times the annual GDP of the U.S. However, our clients prospered, taking full advantage of the bear market strategies developed over more than four decades. Bert Dohmen has always said that bear markets actually bring greater opportunities than bull markets, because stocks decline faster than they rise. And furthermore, the bearish side is not as crowded. With Bert Dohmen’s advice you don’t have to be an investment pro: just follow his analysis and forecasts and implement the recommendations. It’s easy to make money during a bull market. As they say, “the tide lifts all boats.” However, for over 39 years Bert Dohmen has shown his clients how to profit during devastating bear markets. You too can learn how to enjoy bear markets and crashes.less

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The Great Oil Short Squeeze

Date: Monday, November 27, 2017 6:26 PM EST

As you know, the oil industry has been in a severe depression since 2014. Oil prices plummeted from over $100/barrel all the way down to $30/barrel. Today, that figure hovers around $50 and is showing little signs of returning back to the $100 level any time soon. As bullish speculators continue to get burned by “demand is finally back” or “supply is finally falling,” more and more oil giants fall on serious hard times.

Oil has fallen for a multitude of reasons over the past few years. A stronger dollar, a failure of OPEC to control production, an oversupply of crude oil, the Iran Nuclear Deal, U.S legalizing oil exports, the list goes on and on. When one of these reasons shows signs of a reversal, traders pile back into oil and are eventually burned when supply picks back up and the price falls back down.

Technological improvements in the Shale industry have caused a structural change in the oil market. The U.S is rich in shale; it’s cheaper to produce and easier to expand production. Consistently, when oil prices rise, the U.S and other non-OPEC countries increase production bringing the oil price back down.

Most traders fail to understand this. Just look at the oil prices and CFTC’s net speculative oil futures positioning.

As you can see in the chart, right now, most traders have almost never been so bullish based on the incredibly high number of Speculative Positions (blue line). Most traders have a tendency of being wrong. Since early October, long speculative positioning has shot up over 10% while short positioning has taken a nosedive. Overall, this has created a 44% rise in net speculative positioning in a very short period of time. This is what a short squeeze looks like.

The run-up in oil is not due to fundamentals, but due to rapid margin calls from short sellers and financial engineering by OPEC. Many bullish traders are piling in, believing this squeeze is signal of a real change, when it isn’t.

This meteoritic rise in speculative positioning precedes an important OPEC meeting over the possibility of continued supply cuts that will occur in the end of November. Traders seem to be assured that supply cuts will permanently fix the oil market and cause prices to rise to $70 (or greater). While supply cut extensions are likely, we do not believe that will permanently fix the oil market.

That being said, Saudi Arabia has been successful in financial engineering thus far and may be able to force a larger spike in oil prices. There is evidence that Saudi Arabia is selling long dated oil futures contracts to force “backwardation” in the oil market. This halts any hedging by American shale producers (increasing their risk of production) and also creates a false bullish signal ahead of the OPEC meeting. This could further exacerbate oil prices to the upside and cause it to rapidly increase.

Remember, while net speculative positions are high so too are total short positions. Back in 2014, Speculative shorts sat at 90K positions. Today that figure is well over 200K. If the current short squeeze continues, oil could get driven much higher. Therefore, the risk of a short squeeze is high and prudent traders should remain cautious.

While fascinating, the oil market is extremely complex and often tumultuous. Yet, it has such a major impact on the rest of the economy and other investments. For the time being, oil is the world’s primary energy source and smart investors should keep a close eye on its movements. And that’s exactly what we do for astute investors around the world.

We analyze the data, chart our technicals, and examine the various risks and opportunities across the market. At Dohmen Capital, we make sure our client receive the most in-depth, thorough, and often contrarian research that will make (and save) their wealth.

Now is a great time to join our elite group of clients including some of the most successful business owners and CEO’s around the globe. We are offering a 20% discount as part of our “Cyber Monday” special offers. Make sure to sign up today as this special will only be available for a limited time.

To learn more, please visit us at DohmenCapital.com or click here: DohmenCapital.com

Wishing you successful investing,

Bert Dohmen,

Founder Dohmen Capital Research, Inc. Celebrating its 40th year of excellence in unbiased Research

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Dean Gilmore • 7 years ago • Member's comment

Good read, thanks.

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