Oil prices rallied at the start of 2018 with WTI crude topping $66/barrel in late January. Short interest in the U.S./Canadian Oil, Gas & Consumable Fuel Sector tracked higher along with the price of crude, hitting a year-to-date high of $55.2 billion in mid-January. By the time WTI crude hit its year-to-date low of $58.98 on February 14th, short interest in the sector had just hit its year-to-date low of $43.1 billion on February 12th. Since hitting its lows, the price of WTI crude has risen 15% to $67.75 and short interest in the sector has increased by 27% to $54.9 billion. Oil & Gas equity short sellers have been shorting into crude price strength and covering on price weakness.
While short interest in the Sector is up 10.7% for the year, most of the increase occurred in April with overall short interest increasing by $6.4 billion, or +13.2%. The sub-industries with the largest growth of short exposure were Integrated Oil & Gas and the Oil & Gas Exploration and Production sectors with $1.5 billion and $3.7 billion of new short interest in April.
The stocks with the largest increase in short interest over the last 30 days were Concho Resources (CXO), TransCanada Corp (TRP CN) and Valero Energy (VLO) while the stocks with the largest decrease in short interest were Enbridge Inc (ENB CN), Range Resources (RRC) and Exxon Mobil (XOM).
Oil, Gas & Consumable Fuel Sector short sellers are increasing their short exposure to the sector as higher crude prices boost securities prices, and looking for price reversals when crude prices retreat. This is especially true in the exploration and production sector where short interest has increased by over $5 billion in 2018.
Want deeper insight into the above analysis? Contact:
Managing Director Predictive Analytics, S3 Partners, LLC
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.