(WCTW) An Unsustainable Equilibrium
Lower oil-on-water will hit onshore inventories soon; the oil deficit is clearly unsustainable.
What we are witnessing in the oil market today is “obviously” unsustainable. You wouldn’t be able to figure that out if you only looked at crude oil prices.
Since the start of June, Brent has been flat despite the whole nonsense about the MOU, the Strait of Hormuz reopening, and the latest fiasco about the Iran/Oman deal.
To the casual observer, it may appear that the worst is behind us. I mean, price is the ultimate barometer of truth, right?
No, wrong. And that’s the problem with the oil market. What used to be signals in the market are no longer signals. Instead, there are deliberate attempts to mask the market from the ability to achieve true price discovery. First, it was position suppression driven by the risk of another imminent peace headline, followed by direct intervention.
And the irony of this whole ordeal is that market participants are now falsely believing that the largest oil supply outage in history is somehow resulting in a balanced market. What an amazing time to be alive.
What we are witnessing in the oil market today is an unsustainable equilibrium. It is not possible to continue in this state for even a few more weeks. From both an oil math and geopolitical standpoint, this is a powder keg waiting to explode.