It's So F***Ing Beautiful

This week was best characterized as 1) an overreaction supported by some fundamental truth and 2) an overreaction. For many of us who follow oil market fundamentals closely, the drop to $72 was exaggerated, and to my surprise, the CFTC report capturing up to this week's Tuesday's data showed perfectly why that was the case.

Source: CFTC, Giovanni Staunovo

According to Giovanni, this is the 6th largest position decline since 2011. If you look at total net-length, oil positioning is now at the lowest level in the last 5-years. This is even lower than March/April 2020!

While some of you may observe that the drop in positioning could be a reflection of sentiment (to the bear side) on oil market fundamentals, we would argue otherwise. Yes, EIA oil inventories should large total liquid builds the last two weeks, but those builds will reverse as oil inventories should start to draw globally.