One week ago, when oil dropped for the first time in 2017 below $52.80 - Gartman's sell threshold - we said that Dennis Gartman had been stopped out of his February 21 Brent/WTI crude long trade reco. After all, that was the price level Gartman had said would trigger the liquidation. It turns out he was being somewhat "generous" with this number, and Gartman somehow kept his position on. In retrospect, he should have sold, especially after yesterday's 5.5% plunge, oil continued to tumble this morning, sliding another 2.5% below $49.
So where is Gartman now? Well, as per his official overnight letter, he is now really and truly out:
We are out of crude oil as our stops were hit, costing us, on average a bit more than a percent and one half
And some more visual commentary on the topic of oil's plunge:
CRUDE OIL PRICES COLLAPSED YESTERDAY and we can blame that weakness upon any number of fundamental reasons; however, far too many are pointing to the supposedly sizeable increase in crude oil inventories as reported out yesterday by the EIA. This is nonsense. The crude oil inventory had little if anything to do with the crude oil market’s weakness for although crude inventories rose 8.2 million barrels as reported by the EIA, this was well below the 11.6 million barrels reported the day previous b the API.
Further, those blaming the increase in the EIA crude inventory for the energy market’s weakness have to explain away the far more surprising declines in gasoline and distillate inventories, which left the aggregated sum of crude + products to actually fall by 1.0 million barrels compared to the API’s +3.7 million barrels and compared to the past history’s +1.0 million barrels. Falling inventories of “energy” are bullish, not bearish.
Make of the bolded statement what you will. In any case, he goes on, focusing on shale production.
If US production can be increased as materially as it has been here, it can be and will be increased abroad. The Saudis are justifiably concerned with that very distinct probability and it is this that broke the oil market yesterday. It was not a one day increase in EIA inventories; it was the possibility… nay, the probability… that Saudi, and Russian, and Indonesian, and Nigerian, and Chinese and Canadian, and at Australian et al production shall rise. THAT is the reason for the break and the CERAWeek meetings have served to focus, laser-like, upon that.
Regarding the term structure, no one anywhere should be surprised to note that the term structures collapsed yesterday; that is, the averaged front month contango has widened materially from 62 cents/barrel yesterday to $1.10/barrel this morning. Further, where the one year spreads in Brent crude had gone backwardated from June onward as of yesterday morning that has all but disappeared as of this morning, while WTI is at a contango in the year spreads from May onward.
We failed… miserably… in paying attention to the shifting nature of the term structure for more than a week ago we noted a change that was taking place and which was incipiently bearish of crude oil, but we failed to pay proper and full heed to the signals that this shift was sending to us. Once again, the changing tides of the term structures were signaling an impending change in crude oil prices but we failed to pay heed to something we have at length promoted… often in rather lonely fashion. This is unforgiveable. It shall not happen again.
Instead of commenting on the above - it is mostly self-explanatory - here is just one chart.
The good news for oil bears: Gartman is not short oil... yet.