Are Oil Bulls Going to Crash the Price of Oil?

Oil barrel with up and sown arrows

Oil barrel with up and sown arrowsUsually, when somebody’s bullish on a commodity or stock, they are betting that the price of that commodity or stock would go up. Long investment is all about appreciation. The problem is a huge amount of long investment can actually crash the price of a stock or commodity if the bulls behind these long investments change their minds.

According to some oil analysts, this is precisely what’s at play with the global price of oil. Due to the huge supply in oil, the current glut hasn’t been completely translated into a “realistic” oil price. According to these analysts, if the oil glut was fully reflected in oil’s price, oil would be around $30 to $35 per barrel. This is obviously not the case.

What would account for the seemingly inflated price of oil? Oil bulls. These are oil speculators that are predicting that the price of oil will spike back up. They are looking for a V-shaped recovery. It’s only a matter of time according to oil bears, traders speculating that the price will continue to crash, until the bulls throw in the towel.

The main trend the bulls are butting their heads against is the fact that there is just too much oil being produced. You only need to look at the US market where for every oil rig decommissioned, the total price of oil continues to spike up. It flies against logic, but this is precisely what’s happening.

Since oil bulls can only maintain their position for so long in the face of continued oil price erosion, if and when they finally give up, expect the price of oil to almost totally collapse. We’re talking about a huge amount of market support evaporating overnight leading to a tremendous erosion in pricing.

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