WTI crude settled up $5.95 to $105.71.

There were two main pieces of fundamental news today: 1) Libya is ending the blockage, which will add some 900k bpd or production, and 2) US oil inventories showed a big surprise build.

On the macro front, US CPI was high, the ECB was more hawkish and the Nasdaq is down another 1.8%. China pushed back against the WHO calling to end its dyanmic covid zero policy. The US is selling 1 million barrels per day from the SPR. Hungary is balking at an EU ban on Russian oil (though there’s been some progress).

Yet here we are with crude up nearly 6%. It’s an incredible flex for the oil bulls.

Granted the rally comes after two days of strong selling from above $110 but oil is now once again positive in the month in what would be the sixth consecutive monthly gain.

On the face of it, the resilience in oil is extremely bullish. Oil is always a macro trade but that can’t fall in this kind of macro backdrop is remarkable.

I can only think of two things:

1) Someone is stockpiling. The Ukraine war has made countries and refineries ultra-sensitive to supply and they’re filling the tanks.

2) The market is undersupplied

The latter is a big problem and one I think that is inevitable. But that it could come with so much China demand offline is almost frightening. If/when they return, where will the barrels come from? What’s to stop a rally to $150 or above?

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