They’re dunking on the oil bulls
Oil is on my radar.1.
This is starting to look like capitulation. WTI is down another $3.13 to $77.26 today and is down dramatically from $91.62 last Thursday. The driver is obviously the peace in Hormuz and Trump repeatedly saying the Strait will be opened this week. That's a positive timeline and a reason to sell oil but all the way down to $77 is eyebrow raising.
Crude was at $65 before the war and $60 before the rumblings of war but this has been a monumental shock to supply.The world lost 10-12 million barrels per day throughout the war, which amounted to around 100 days. That's more than a billion barrels of oil that will need to be backfilled. I'm skeptical that any more than 1 mbpd of demand was destroyed and the deficit continues to worsen by the day.
Once the Strait is truly opened, it's going to take some time for the oil to flow and yesterday, former Goldman Sachs commodities head Jeff Currie said that flows will not normalize until year end.
Currie pointed to something I've been saying about physical inventories: That people took Trump at his word that oil prices would fall. That meant that anyone with oil inventories to sell was selling them. That stockpile drawdown cushioned the market tremendously but soon the mood will shift.
"Have you looked at German heating oil inventories," Currie said. "They're not restocking because they believe uncertainty is going to lead to a lower price tomorrow. Why am I in this market today if I can buy it cheaper tomorrow?"
I think we're very close to 'tomorrow'.
Right now, there are 60 million barrels that will get flushed out of Hormuz as it opens but ships might not be in a rush to go back and get more, which should slow restocking.
What really has my attention is the price action and the commentary.
The swift fall to $76 looks like a capitulation from the oil bulls. In terms of specs, the risk-reward of selling oil here at a trade is terrible so I can't imagine the sellers are specs. Instead, it's longs that are getting roughed up.
What really has my attention is the commentary and I've seen this pattern over and over. It's the winners dunking on the losers, the losers going from disbelief to anger to capitulation.
That kind of thing is one of the most-reliable indicators of a bottom.
This article was written by Adam Button at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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