The Market Is Far Too Bearish On Oil
There are times in the oil market when the obvious starts to become a bit too obvious. And what's obvious in my view today is that people are now far too bearish on oil.
There are multiple variables I will point to in supporting my view:
Physical market indicators
US shale narrative
Storage changes
Physically speaking, we are seeing a large divergence with what's happening in Q1 2024 vs Q1 2023. Remember that Q1 2023 ended up showing builds of close to ~1 million b/d with the US showing 2/3rds of it.
However, if we look at what the physical market is saying today, it's painting a completely different picture. Here are where Brent and WTI timespreads are trading:
Brent
WTI
Last Year:
The startling divergence is going contrary to what the market expected going into Q1 2024. Note that as we entered 2023, we had warned repeatedly that Q1 2023 would show builds, and it was all about "surviving" Q1. But this time around, we are preaching a different approach: we should take advantage.