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A Worrying Trend For Oil Bulls

2019 has been lovely for crude oil bulls. Brent prices increased 54 cents on their first trading day of January beginning a move in which oil rose on 26 of the first 39 trading days of the year. Downside corrections have been minimal and the trend has been clear. Anyone with access to a Buy button could have made money trading oil over the last eight weeks.

And who do we have to thank for this ridiculously simple chart? Our assessment is that OPEC+ production cuts, a dovish US Fed (as well as a dovish global central banking community) and progress towards a US/China trade deal have all played a role in fattening the wallets of anyone who is long oil. Hedge funds have been on a significant buying spree in oil derivatives and on the macro side oil has benefited from a broad risk-on move in which stock markets have screamed higher.

Unfortunately, there’s a puzzling trend in place through the first two months of the year which will have to reverse in order for crude oil to continues its winning ways- bearish DOE data. US crude oil and gasoline stocks have revealed a persistently bearish trend in the last two months of too much supply and not enough demand. The results are seemingly the same each week. Crude oil stocks increase highlighted by a substantial increase of oil in the Cushing delivery hub. Refiner demand growth is less than 1% y/y. Meanwhile gasoline stocks continue to balloon and US gasoline demand and exports have actually decreased versus 2018.

Interestingly,…




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