The GameStop Corp. and AMC Entertainment Holdings Inc. retail frenzy was bigger than the market for West Texas Intermediate oil futures, on a notional dollar basis, RBC Capital Markets said.
GameStop and AMC saw a collective $26.1 billion in trading last week, compared with $20 billion in WTI contracts, according to a group of RBC analysts led by Michael Tran. To be sure, a crude short squeeze appears improbable, given that positioning in WTI futures is net long at the moment, Commodity Futures Trading Commission data shows. Also, the barriers to entry into energy futures for non-specialists are significant.
RBC analyzed the level of oil interest within Reddit’s WallStreetBets forum over the last month and found it paltry relative to the total volume of posts. The analysts spotted 136 posts that referenced the crude market out of 6 million posts from 680,000 unique users. Of those posts, 39% expressed negative sentiment toward oil, while 20% were positive and the remaining 41% were neutral.
Even when commodities experience sudden price dislocations, things normalize in the medium term, the analysts wrote.
“Even when temporary bouts of inefficiency occur, such as when WTI prices infamously printed sub-zero last year, the extreme mispricing was exceptionally short lived before commodity investors, hedge funds or physical trading houses arbitraged away inefficiencies and reverted the market toward intrinsic value,” they wrote.