Oil has sold down in tandem with an unwind in equities. Many will look at NVIDIA’s earnings report as the linchpin. The earnings were good. The market immediately bought the earnings number, then sold down aggressively at the reopen of trade. This is deleveraging. People sell what’s liquid to fund that which is less liquid, or go to cash. The reasons for correlation are myriad.
It is somewhat clearer now, how the same liquidity that kept equities elevated, also kept energy alive. In the last week, I decided to liquidate XLE April put spreads. The reason for which was that despite shitty looking futures and an oversupplied 12 month forward market, the single stocks were being bought up- back to highs. The price action simply was not agreeing with my trade thesis. Timing is everything. XLE did close -2.28% on the week. It’s never about being right, its always about right timing.
It seems destined now that $55’s trade on WTI will prevail in the next 5 trading sessions, if not lower.
Shale 4.0 – The Long Tail That Changes the Game
For all the noise about U.S. “energy dominance,” shale still leaves 85%–90% of its oil in the reservoir. Shale 4.0 is the industry’s attempt to close that gap, not by drilling more, but by recovering more from the rock they already know is rich.
Exxon is pushing lightweight proppants made from petroleum coke to get deeper into the fractures; Chevron is working on surfactants that reduce friction and let trapped oil move. The payoff is enormous: a single percentage-point increase in recovery is worth billions across the Permian, Bakken and DJ. This isn’t about unleashing a new super-cycle; it’s about turning shale from a short-burst sprinter into a marathon runner that stays on the field far longer than OPEC+ expected.
If these techniques scale, and the Americans usually find a way, U.S. supply gets a longer tail, and every extra barrel that surfaces limits how much OPEC+ can safely pump. As Diamondback’s Kaes Van’t Hof put it: ‘‘never underestimate the American engineer.’’
Commitment Of Traders Report
In summary. We have a dual factor of Commercials increasing their short interest (hedging against downside price). Simultaneously, Specs are increasing their short side. Double trouble. This is seen through deteriorating price on front month futures. Not a regime to be long into or to get smart with/ fade. More downside cometh.
We have built in a small machine learning model into the C.O.T analysis tool. This is now triggering signals that show extreme short side interest.
