This seems to be turning into a habit: For the second time now, I bought oil futures with the intention of holding them for the longer run. Then oil rallied over the next few days, and on impulse, I sold them again.
Not exactly very helpful for the purpose of long-term hedging. But somehow, I have the feeling that it's too early for a sustained rally in the oil price, so when the price goes up 10 % in just a few days, I'd rather take my profits and wait for the price to dip again. Though of course there is the possibility that it will not dip, and the rally will continue. In which case I won't be hedged the way I wanted to be...
The reason for the latest rally seems to be mild optimism about the state of the world economy. I'm not sure this is sustainable:
- For all we know, the world economy will continue to shrink in coming months. Probably only a bit, as compared to the severe contraction over the last half year. But it's rather unlikely that we will see significant output growth anytime soon.
- To some extent, oil consumption lags the real economic cycle: Unemployment will continue to rise sharply just about everywhere during the rest of this year. People without a job don't need to commute to work. They don't go on business trips. And unless they are wealthy ex investment bankers, they are less likely to fly off for expensive long-distance vacations.
- There's a deepening sense of gloom in Russia, where domestic oil consumption is likely to go down sharply, and the government will be happy eager to sell as much oil as it can abroad to raise money.