This article goes in more details in the “Sentiment analysis” I evoked in: Oil Trading – Oil is going down on the medium term. (Q1 2017) – Fundamentals, Sentiment and Price Action Analysis

  • There is a downside risk to prices in the very near future.

Hedge funds and money managers have amassed the most bullish combined position in years, with everyone going long on oil, betting that $60 was around the corner.

The danger is that more traders start to bail out of those long bets, sparking a sudden correction in prices on the downside.

This is a common rule in trading, when everyone is bullish sell, when everyone is bearish, buy.

  • This process may have already began

Money managers’ WTI net-long position slips from all-time

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Bloomberg article: Investors Start Doubting Oil Rally After Failure to Top $55

After hitting a record high last week, hedge funds reduced wagers that U.S. oil prices would rise as concern grows that the market is again becoming vulnerable to a drop. Earlier bullish sentiment was based on optimism that OPEC production cuts would ease supply gluts. Now record U.S. crude stockpiles are raising doubts about that outlook.

  • More and more concerns in the industry

John Kilduff, a partner at Again Capital LLC:

There’s starting to be fatigue about the range we’ve been trading in,It won’t be summer until we break out to the upside.

Doug King, chief investment officer at RCMA Asset Management:

There’s a lot of complacency out there. If these bets start to unwind, it will be a bloodbath

The market continues its slow and painful adjustment process, which should see more price gains at some point in the future, but the short-term looks more shaky.