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Hedge funds bet big - a billion barrels big - on rising crude prices

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Crude prices are higher Tuesday morning as speculative investor bets on future prices reach all-time highs. The net futures position in oil – long contracts minus short contracts – has reached one billion barrels for the first time ever,

"'Net long U.S. crude futures and options positions are also at a record high, U.S. data showed on Friday."This prolonged and increasing overcrowding of speculative net longs should be a cause for concern,' said Jonathan Chan, an investment analyst at Phillip Futures. 'Should there come a time when these speculative positions decide to unwind, oil prices will be in for a significant correction.'"

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Investors in the sector also have falling levels of gasoline demand to worry about,

"The glut of gasoline is now the worst in 27 years. At 259 million barrels, U.S. gasoline storage levels are now at their highest level since the EIA began tracking the data back in 1990… More demand should have soaked up … excess supply. However, that is where the problem gets worse. Lately, U.S. demand has faltered."

"Oil rises as OPEC aims for deeper output cuts" – Reuters
"Biggest Gasoline Glut In 27 Years Could Crash Oil Markets" – Yahoo! Finance
"@Ole_S_Hansen BOOM!!! The combined speculative gross-long in WTI and Brent hit 1 billion barrels for the first time ever in week to Feb 14 #OOTT #Oil " – (chart) Twitter

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Electric vehicles and stores alternative energy have yet to put a major dent in fossil fuel demand but Bloomberg reports that situation may change in the near future,

"Lenders including Investec Plc, Mitsubishi UFJ Financial Group Inc. and Prudential Financial Inc. are looking to finance large-scale energy-storage projects from California to Germany, marking a coming-of-age moment for the fledgling industry. The systems help utilities solve a longstanding clean-power conundrum: managing the unpredictable output from wind and solar farms, and retaining electricity until it's needed … 'Having big money come in is the first step to widespread deployment,' Brad Meikle, a San Francisco-based analyst for Craig-Hallum Capital Group LLC, said in an interview."

"The Age of the Giant Battery Is Almost Upon Us" – Bloomberg

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Strong results from BHP Billiton Ltd., combined with the darkening short term outlook for oil, may have resource investors emphasizing metals in the coming months,

"A rebound in commodities from early 2016 has seen the mining sector transformed as China's stimulus has spurred activity in property and infrastructure sectors, boosting demand for raw materials. BHP cautioned that improved global growth may be delayed by rising political uncertainty, with China's exports challenged by a threat from protectionism."

"BHP First-Half Profit Soars on Price Rally to Beat Estimates" – Bloomberg

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FT Alphaville's Matthew Klein wrote a terrific piece on how global monetary stimulus has remained trapped in financial markets, primarily benefiting holders of assets, and the conventional wisdom that this has occurred on the back of workers is a myth,

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"The returns to owning capital have grown far in excess of national income. More than a seventh of all the money earned in America has gone to equity owners in the past few years, nearly double the proportion in the 1980s…the data show rising returns to equity owners have largely come at the expense of creditors, not workers or the indigent. Capital income as a whole hasn't changed much as a share of the total. Instead, interest payments paid by businesses have plunged, and the extra money has been returned to shareholders."

"The long rise in profits is mostly just the flip side of falling interest rates" – Klein, FT Alphaville (free with registration)

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Tweet of the Day: "@SBarlow_ROB Hedge Funds' Next Big Short: US Malls - ValueWalk valuewalk.com/2017/02/hedge-… " – Twitter

Diversion: "The 21 best science movies and shows streaming on Netflix that will make you smarter" – Business Insider

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