Since the Iran conflict began, many barrel counters have been able to pinpoint precisely “when” onshore oil inventories would start falling. No, it’s not because we have crystal balls. It was simply because we gave a damn.
As I explained in an article published on March 4, 2026 titled, “Why Aren’t Oil Prices At $100?“ We wrote about all the “cushions” that had to be absorbed before onshore inventories started to plummet.
Well, we are here. (Note: Please also read, “The Oil Market Breaking Point Is Here.”
B.A.C.D is coming. Big ass crude draws, and they will break the record books.
And before I continue, I want to give you an analogy. This analogy is important because it highlights what I think is going on.
Natural gas community vs the generalist
There’s another niche group that we belong to: the natural gas community.
In this particular group, we follow weather patterns, heating degree days, cooling degree days, wind, pipeline flow, and all sorts of weird data. Generalists understand better not to traverse the world of natural gas. It is the sector where generalists come to die.
Every winter, specialists in the natural gas world are keenly watching changes in weather models, particularly the one model that rules them all, ECMWF-EPS. This is the European Ensemble model, or, as it’s aptly nicknamed, King Euro.
The weather model updates four times a day, but there are two main updates, the 00z and 12z. I won’t go into the technicalities of the model, but just know that every time this is updated, natural gas prices surge or drop based on changes in heating demand.
The natural gas market has adapted to the fast-changing pace of real-time information. There are billions of dollars moving within seconds as the data changes, so the price is somewhat efficient.
But every once in a while, there’s a weather event so shocking that the model fails to price this all in at once. This was most notable at the end of January this year when a record-breaking cold blast came.
For natural gas, the proverbial “cold blast” is the one thing that would send prices to the moon.
So, if we put the current Strait of Hormuz oil outage in natural gas terms, it’s like the coldest weather event in history, lasting 66 days. And since natural gas demand is measured in real-time, the whole world can see it and price it immediately. Spot cash prices surge, demand is needed immediately, and the financial market reacts.
But the oil market hasn’t done that yet. Why?
Well, here’s your answer.
BACD: Big ass crude draws
On April 11, we published a report titled, “Making Sense Of The Oil Market.” It was hard to understand why oil prices aren’t reflecting the incoming draws we are seeing. Most energy specialists with experience in natural gas know that if projections show a large deficit coming, markets should price it in, right?
Well, the market was inefficient. BACD is here now.