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Here’s Why Investors Are Betting On Oil

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There are many opinions are surrounding when the oil price will recover. These views are sometimes manifested through the placing of bets on the price of oil.

Some believe the price will stay low for the foreseeable future, others think it will begin to gradually increase from here on out. According to the U.S. Commodity Futures Trading Commission, both long and short bets on the price of oil have reached a peak since the commission started tracking the data in 2006. The unpredictability of the oil price can be very profitable if one manages to accurately predict the direction of a price movement.

LongShort

These inconsistent jumps and subsequent falls in price open up opportunities for speculators who hope to profit from the rise or fall in the price of oil. U.S. crude stockpiles grew to 502.7 million barrels by the end of January. That is the highest figure seen since 1930, according to the EIA. As Tim Evans of Citi Futures Perspective states, “Any commodity market where inventories are at the highest level in more than 85 years is going to be bearish.”

So far, the majority of the winners in the market have been placing shorts. They have expected the price to remain low and have attempted to profit from it. Others invest in the future of oil because they see it as currently selling at a discount and believe it must recover. One can only hope that personal ideologies prove profitable in the market.

Article written by HEI contributor Timothy McNally.

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