Fighting Between Going Really Long Or Really Really Long
In the years I've followed the oil market, I've never seen a larger disconnect between reality and fundamentals, never. There are some notable years like early 2017, late 2018, and 2020. But I think this is the first time that the market is trying to front-run the prospects of a horrendous demand drop-off. I mean just look at this chart on speculator positioning on diesel.
That's just wild. And it's not just diesel. The entire oil complex remains extremely bearish.
What's also really interesting about everything I'm seeing in oil today is that the bear thesis is well-known. Most of the oil bulls I'm following can recite the bear thesis as well as the bears, and what the bears are failing to acknowledge is that because positioning is so one-sided, most of that bearishness may be priced in already.
In addition, I'm not seeing a lot of bears acknowledge the fact that their bearish oil price forecast would translate to lower non-OPEC supply growth, something we repeatedly pointed out over the last 2-weeks.
Similar to how a lot of oil bulls failed to acknowledge the falling oil demand in 2022 due to high oil prices, oil bears are not acknowledging that lower oil prices will mute supply growth, which will make the perception of reality (supply growth outperforming) not come to fruition.
As a result, I'm debating between being really long oil to being really really long oil.