Oil prices had been hovering above $100 per barrel just last year when Saudi Arabia decided to pump more oil from its wells and flood the market with oversupply. Since then oil prices fell from a whopping $107 per barrel to $42 per barrel. It was a great fall that nobody expected and anticipated. All of a sudden Saudi Arabia decides that shale oil boom in USA is a danger to its market monopoly and it starts overpumping in an effort to nip these budding shale oil companies in the bud. Oil prices now are hovering around $55 per barrel. During this time market analysts and the hedge funds have been dreaming of a return to the golden days when oil prices had been above $100 per barrel.
Slowly market analysts started talking of oil reaching $100 per barrel again as a too distant dream which may now never happen keeping in view the shale oil boom that is taking place in USA and will soon spread to the rest of the world. Now hedge funds started believing oil price returning to the range of $70-80 per barrel. Oil did make a recovery but once again fundamentals are pointing towards a downward fall. Saudi Arabia is still not ready to stop pumping more oil from its wells.
Speculators are losing faith in the oil rally, judging that OPEC will keep increasing supply from the highest level since 2012.
Their net-long position in West Texas Intermediate crude dropped 2.1 percent, as long wagers fell the most in two months and short bets declined to the lowest since August, U.S. Commodity Futures Trading Commission data show.