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WTI Short Squeeze

[Anschutz]

Interesting post on twitter this morning outining a thesis for a major short squeeze in oil...

@DarioCpx

 

Will $WTI be the biggest short squeeze ever? I have addressed the topic of $WTI manipulation many times in the past few years, but now we may be close to a point where big problems might arise. - US #SPR is being depleted at a shocking speed at a time when geopolitical risks are multiplying every day. US SPR currently stands at ~348m barrels. - Why aren't markets concerned? Maybe because US total stocks of petroleum reserves, currently around ~1.6b barrels, have remained relatively stable over the years? Here is the problem: most of these reserves are military ones and not "accessible," leaving only a fraction available for commercial use in case of a sudden drop in crude #stocks. A sudden cut in supplies of crude (or a sharp increase in need) will only leave the US with about ~30 days of supply to support its domestic economy. - Here is why SPR is so important: these reserves are the buffer required to bring back online domestic production before the tanks run dry. However, local US oil companies (currently printing money) are unwilling to increase production because that will increase their costs and profitability sharply. Furthermore, they are facing an increasing number of obstacles in sourcing the financing needed due to the increasing number of ESG policies set against them. - If the above wasn't enough, domestic companies have practically stopped any new investments after the shale oil debacle, so no additional capacity is expected in the foreseeable future. After considering all of the above, how can we tell that the supply is already very tight? The market is already telling us, but few are listening! A few weeks ago, when the US DOE announced the purchase of 3m barrels for its SPR, the price jumped from ~68$ to above 70$. It doesn't take much analysis to picture where the price would go if SPR is refilled back to 600m+, the level when the great manipulative campaign started. This will never happen, so what can happen instead is an oil embargo to the US. Why? #UAE embarked on a huge development plan that at best will "break even" this year with an oil price at 80-85$. However, UAE is becoming more "uncomfortable" in being paid in $USD. Why? It's pretty obvious: the currency is depreciating fast thanks to the #FED. Furthermore, after Russia Central Bank Treasury reserves confiscation, all BRICS economies don't ignore anymore the risk of their reserves not being "money good" regardless of geopolitical developments. As a matter of fact, USD is less and less considered as the world reserve currency. So, considering all that I just said, which other currency can UAE place its reserves with? No one. Why? Because, besides the fact any other viable alternative depreciating faster than USD, only the USD is still globally accepted to settle international balances. So, how to hedge this risk? With a much higher oil price, clearly! How much? Here we enter the realm of speculation, but surely there won't be much resistance from now till 100$ since that's the level China already declared they will use their own SPR to slow down any price increase. The problem is, the more WTI price goes up, the more inflation goes up, and the more the governments will need to devalue their currencies to keep up. It is literally a death spiral. Add to this the fact that oil dealers have built up an amount of shorts as big as May 2020 (when oil price turned negative), and you have the perfect set up for a historical short squeeze.

 

[downwithdotcom1]

100% agree as their have been numerous stories about massive builds of net short positions for weeks now... I believe partially supported by the thought of a IRAN nuclear deal (but not a deal) that would be seen a huge negative to the supply side of the market. It still may happen as BIDEN will do a deal with the devil himself to lower oil prices into the election so be wary..dwdc

[BLACKOILPEAKING]

Sir you are spot on I have been buying calls on cpg ,cve ctra,krp,crk,este,rig.I will trade gush and keep adding 2024 calls  near the money and 2025 way out of the money.I was up so much 400k last year and should of  taken more off the table.But FJB gamed the market but now the problem is much bigger going all in for a run of a life time.but this time selling out at 80% and in to real

[DrBill1]

AGREE WITH YOU---SPOT ON. MY REGARDS,