A Glorious Setup Is Coming For Oil

Positioning, positioning, positioning. That's the glorious setup I see in the oil market today. John Kemp, one of my favorite follows, just published his latest column this week pointing to the extreme pessimism we are seeing in oil futures positioning. 

In particular, this chart is one of my all-time favorites.

The ratio of long to short positions is at one of the lowest levels in the last 10 years. While this is a reflection of how money managers (or CTAs) are thinking about oil going forward, I think history has been a good guide as to what happened to prices every time this ratio has gone to extremes (both ends).

Let's look at WTI's performance 3-months following the lows we've seen in the ratio.

Jan 12, 2016: +22.42%

Jan 8, 2019: +15.56%

March 21, 2023: +6.94%