This is a market where paper traders and speculators have completely stopped counting barrels, holding the least net-long U.S. crude position since April, leaving those in the physical markets shaking their heads. However, I’ve learned that the longer this goes on, the worse the situation gets and the greater the ultimate reaction in price.
Here is a sample of some of the fundamentals being ignored that are keeping the price of crude oil below pre-COVID levels. First, global air traffic is the highest it’s been in years and according to Rystad, jet, diesel, and gasoline demand is 1.3 million barrels a day higher than last year. The EIA recently made a massive revision to its U.S. oil demand estimate for May increasing it by 973,000 barrels a day to 20.776 million barrels. For some perspective, this is the highest level ever for total U.S. oil demand in May. Meanwhile, U.S. exports to China are the second highest on record.