Oil Price News: Crude Glut Might Lead WTI To $50

The short: WTI MUST hit $50 at the very least before a meaningful pullback upwards. For now well sell rips and ride dips.

As mentioned in recent reports, the bulls and bears are pumping out propaganda at fierce levels recently. There is only one truth. Price is down $20 since Junes 12 day war high. The noise is enough to make a newbie to energy trading feel seasick. Which way is up?

The landmen and drillers i.e upstream players do not want to hear about short to medium term dynamics. They are investing over a 10 to 20 year timeline, half of the time, they are making generational investments in their companies. This is opposite to a market speculator operating in the quarter to quarter game. Like me. A producer’s hedge is a trader ‘s opportunity.

I was triggered to respond to The Conoco CEO saying during the week (talking his book) that he is not seeing a buildup of crude anywhere. And I got beaten up on Twitter for even calling out this bullshit.

“We don’t see floating inventories rising, we don’t see a lot more medium-sour crude coming into the US Gulf Coast, which typically happens if there’s a lot of spare capacity,” ““You look at the physical market, you don’t see that playing itself out,” he said. “So there could be a collision coming.” “We’re all watching some of those kinds of signals wondering: when is the bearishness going to kick in?” “Is there going to be a big flood of supply — which we frankly don’t see? A lot of the OPEC+ increases were paper barrels, they were already in the market.”- Ryan Lance- CEO ConnocoPhillips

Behind the Narrative: Storage and ‘Oil at Sea’ Are Swelling

I was and still am confused by these comments. It only makes sense for Lance to say this, if he is talking his own book to steady investor confidence. Anyone with a market intelligence platform with Kpler, Enverus or Vortexa is able to see that there is a Tsunami of supply out there.

We are at 2020 levels of crude oil storage. America is blind to this, the same way they were in 2014 when OPEC last launched a market share war. I talked about exactly this in ‘The Real Game’ back in April. Note, the chart Bloomberg use is a composite of the market intelligence from Vortexa- that I use. Here is the Vortexa data as you get as a follower of the Oil Report.

The Bull case – Medium to long term

Where energy growth/demand is happening

Regardless of price, Nat Gas remains the transitionary fuel for oil. Companies well positioned to produce and deliver gas power will thrive through the next 50 years. This is only my personal view and not investment or trading advice. For transparency- I hold $NRT. American is currently launching its industrial renaissance- this is going to be interesting.

Commitment Of Traders Report

The government shutdown continues to blind us. ICE EU does not even get the data for WTI on Ice as it is controlled by the CFTC.

In an attempt to pull relevant data from the oil market, we can use the Briese COT Movement index tool. This is based on the rules of Stephen Briese who wrote the book Commitment of traders Bible. More on this tool here.

Personally speaking, I am not using this tool personally, but it may be useful to some during this time.

Trade Plan: Where the Short Cover Bounce Can Start

The market is getting completely rinsed out. It doesn’t take a C.O.T report for me to see that not only is open interest dropping here, but an easy move into $55 is without question on the cards. Below there, we visit $53s. In my view, this is where the move will start to get overdone. A temporary relieve will come from anywhere between $55 to $53. Then I might be interested in short term buying.

Note in the chart above, that we will be testing the pre COVID-19 lows at $53. This happened to be the launchpad for getting out of the over supplied COVID-19 era also in Q1 2021.

Bottom Line:

ConocoPhillips’ CEO may not see it, but the data does — a wave of crude is building offshore, rivaling the 2020 glut. U.S. production remains near record highs, inventories are quietly expanding, and WTI looks set to probe the low $50s before any real recovery. America may still believe supply is tight, but the tide rolling toward its shores tells a very different story.