Crude Oil Analysis: Brent’s $80 Target Holds Despite Improving Fundamentals
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Key Points:
- The physical oil system is quietly healing while the tape stares at the wrong charts - Cushing and a 1983-low SPR look grim, but ample volumes are flowing from reserves and back through Hormuz, and the fear-driven glut never showed up.
- China's June import drop was demand destruction, not Nuttall's 450mb hidden-stockpile drain. Kpler and Vortexa read it as refinery run cuts and weak margins, BNEF congestion ran 8.2% higher YoY so it wasn't transport-led, and the pivot to coal, solar and 63%-NEV car sales makes it structural, not a dip to buy.
- The risks have flipped from downside-glut to upside-squeeze. With the post-truce supply surge set to fade, the MoU one breakdown away from re-pricing war risk, and China buying less than the bears assume, the disconnect between the paper market and the physical barrel closes upward.
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Healing has started! Risks remain in second order consequences. I’m going to show below in inventories how the global picture currently looks. This will be significant going forward. The reason for which, is that I suspect we are supplied at one level right now, however should China return to market, this will turn on a dime. Sure, ‘it’s over’ is now fully priced. But in the greater context, we have just departed the zone of first order consequences and are about to enter the second order consequences world. This is where the more interesting trades will be.