As Jim Cramer predicted that oil would head to $65 a barrel, some investors went uber bullish on crude oil.

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

CNBC anchor Jim Cramer and self-declared market strategist Dennis Gartman and ARK Invest’s Cathy Wood have continued to rank as some of the most prolific contrarian indicators over the past two years amid the unrelenting fervor these figures have continued to represent. The consensus view of the market, except for Cathy Wood who seems like a parametric illusion in the current market dynamics.

IndexOne’s inverse i1 index

Of course, Jim Cramer recently won the top spot on this distinguished list after producing a custom Inverse Cramer ETF, which is currently awaiting formal approval from the SEC. Lest our readers doubt the supposed benefit at the heart of Cramer’s recommendations, note that IndexOne’s hypothetical Cramer inverse index — aka i1 Inverse Cramer — is currently up a whopping 31.90 percent so far this year. For reference, the S&P 500 is still down about 17 percent in the same time frame.

Let’s now explore the basic thesis of today’s topic. Jim Cramer recently said that oil – and here we assume he’s referring to the WTI contract – will $65 barrel. Interestingly, as Cramer was explaining his bearish stance on crude oil, Bloomberg reported that WisdomTree’s Brent Crude Oil ETP (BRNT) attracted a record $500 million in inflows last week, more than three times the assets of the ETP, Which amounted to $ 200 million before. This upward flow. Moreover, the largest ETF in the market, the $2.4 billion US Oil Fund (USO), also recorded inflows of $169 million last week, marking the highest such inflow since August 2020.

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So why have some institutional investors now started betting heavily on the prospects for crude oil, smearing the outlook for Jim Cramer’s latest bearish call? Well, the oil story of 2022 has revolved around two contrasting effects: The upward impulse from the Russia-Ukraine conflict has been largely neutralized by China’s COVID-free policies. However, over the past two days, following unprecedented protests across China, the Asian giant has swiftly withdrawn some of its tougher COVID-related mandates, removing this persistent damper on global oil demand.

At the same time, the United States and the European Union have now capped the price for Russian crude shipments of $60, prohibiting the provision of insurance for any shipment that exceeds that price ceiling. With Russia’s Urals-class oil already trading at a significant discount from this cap, it appears that the cap will have little effect on crude oil price dynamics, as outlined by Jim Cramer in his bearish plan. However, the reality is more subtle. First, as noted by OilPrice, the actual oil market trades based on premiums and discounts relative to the forward prices of the major international crude oil standards. Rarely is any crude traded on a fixed price basis. This creates significant uncertainty in the matrix and prevents major traders from touching any Russian crude on the remote possibility that the contracted cargo might breach the cap. It also significantly increases due diligence and oversight costs related to Russian shipments.

Of course, Russia has collected its own tank fleet. However, at least in the short term, even this fleet will not be able to deliver all of Russia’s crude oil to customers in India, China, Turkey, etc. This means that Russian oil exports are very likely to decline. Add China’s reopening into the volatile mix, and it’s completely understandable why some traders are now placing bullish bets on oil, ignoring Jim Cramer’s bearish thesis in the process. The man cannot rest.

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Do you think Jim Cramer will be right about his bearish call on Crude Oil? Let us know your thoughts in the comments section below.

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