Betting against oil after it tops $50 a barrel has been a really good trade

Key Points
  • U.S. West Texas Intermediate crude has topped $50 a barrel 18 times since December, 2014.
  • WTI has traded negative 72 percent of the time one week after futures cross that level, according to hedge fund analytics tool Kensho.
  • Energy stocks have fared better, but still trade mostly down in those instances.
Crude oil breaks above $50
Crude oil breaks above $50

Traders who bet against oil prices continuing to rise after U.S. crude topped $50 a barrel have typically reaped rewards since the oil price crash of 2014.

U.S. West Texas Intermediate crude futures jumped above the psychologically important level on Thursday for the first time in five weeks. The contract rose as high as $50.50 a barrel, the highest intraday level since May 25.

But a nearly three-year trend that has dominated the oil trade suggests the rally may not continue.

CNBC ran a study to see how WTI and related securities perform after breaching the $50 a barrel mark, using hedge fund analytics tool Kensho.

Since December 2014, WTI has popped above $50 a barrel 18 times.

One week after each of those occurrences, WTI has traded positive just 28 percent of the time. In other words, it has traded negative 72 percent of the time.

Across those 18 instances, WTI traded down an average of 1.3 percent, the Kensho study showed.

WTI three-year performance

Energy stocks held up a little better, but still traded mostly negative one week after a spike above $50. The Energy Select Sector SPDR exchange-traded fund traded positive just 44 percent of the time, posting an average loss of 0.79 percent.

It's little surprise then that traders who took short positions in WTI, or bet that the price of oil would fall, generally found themselves in the black.

The United States Short Oil Fund traded positive 67 percent of the time. The average return across the 18 instances was 0.48 percent. The exchange-traded fund inversely reflects moves in WTI. When oil prices fall, traders who bought into the fund profit.

Oil prices have risen this week on reports that demand for crude is better than expected and the persistently oversupplied market is finally tightening. Traders will be looking for signs that brimming stockpiles of oil around the world continue to fall towards the five-year average.

WATCH: Crude demand outlook improves

US crude demand outlook improves
US crude demand outlook improves