Long Positions and Negative Gamma Generate Massive Selloff

There were several fundamental shifts in crude oil balances over the last few weeks, but not enough to generate the massive selloff experienced in WTI crude oil. Prices tumbled 33% in 6-weeks cutting the prices from $75 per barrel in early October down to $50 in late November. Most of the selloff was due to positioning which caught swap dealers offsides, which is very hard to measure.

US crude oil…