by Charles Kennedy
The rally in oil prices over the past three months has been impressive, building confidence among market analysts that prices are heading in the right direction. But part of the gains can be at least partially attributed to the sharp increase in interest in oil exchange traded products.
The Wall Street Journal reports that net bets on rising oil prices represented 40 percent of all the front-month and second-month U.S. oil futures contracts in 2015 and 2016. There has been an uptick in money in exchange traded products compared to investments in broader commodity indexes. “If you have one instrument that’s as much as 40% of the total open interest in the front contract and it’s mostly long, that clearly creates froth on the price,” said Ed Morse, global head of commodities research at Citigroup, according to the WSJ.