David Hay — Haymaker Daily: Why Oil May Soon Hit Bottom (along with storage tanks around the world)
"The ultimate test of an extreme is what happens after it's hit." A macro oil call: WTI futures open interest has collapsed back to its COVID-nadir low — into the worst supply shortage ever seen, with crude stuck at ~$70 despite a mammoth inventory drawdown — so Haymaker expects an oil-price spike in the months ahead.
One-line take: A bullish-oil macro Daily built on a positioning/sentiment extreme. Open interest on WTI oil futures has fallen back to its COVID-nadir low — "astounding" given "this is the worst supply shortage ever seen," with prices "plummeted to $70 despite the mammoth inventory drawdown that has occurred this year." Haymaker reads that (plus record speculative bearishness "as noted last week," and the largest short position ever on the main oil ETF, USO) as contrarian-bullish: as energy analyst John Kemp notes, bull-vs-bear positions are among the lowest in 15 years and "most of these short positions will eventually have to be repurchased, creating a considerable reservoir of potential future buying and upward pressure on prices." Colliding with the largest nations — and smaller ones like Pakistan — needing to replenish or establish strategic petroleum reserves. Net: expect an oil-price spike in the months ahead. The only named security is USO (United States Oil Fund) — cited as a bullish-oil positioning signal (the record short), not an explicit "buy USO" call.
1. Stocks & names mentioned
| Ticker | Name | Research | View | What he said | At |
|---|
| USO | United States Oil Fund | QT · SA · STK | Positive | Cited as a contrarian-bullish signal for oil: "the largest short position ever on the main oil ETF, USO." Per John Kemp, "most of these short positions will eventually have to be repurchased, creating a considerable reservoir of potential future buying and upward pressure on prices." The record short is a positioning tailwind — buyers-in-waiting — layered on WTI open interest at its COVID-nadir low and record futures bearishness. A bullish-oil positioning read, not an explicit "buy USO" trade call. | read |
"View" is Haymaker's stance in this post (Positive / Neutral / Negative), not a price rating; USO's Positive reflects the bullish-oil read of a record short position, not a stand-alone ETF recommendation. Referenced only: energy analyst John Kemp (a cited source, not a security), WTI crude (the underlying), and Pakistan / large-nation SPR replenishment feed the master macro tables, not as tickers. Research: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis.
2. Talking points
The setup: extremes in oil-futures open interest are the tell
- In the Haymaker view of commodities, the ultimate test of an open-interest chart is what happens after extreme points are hit. The huge spikes in late 2016 and 2019 both prefigured sharp price drops (especially 2019, with the pandemic amplifying the early-2020 crash).
- More interesting are the extreme lows in open interest — historically the springboards for powerful rallies.
The historical pattern: every open-interest washout preceded a big rally
- 2020: open interest bottomed during the lockdowns (the futures price briefly went deeply negative for lack of storage); using the June-2020 contract's realistic ~$18 trough as a base, crude more than quadrupled to $90 over the next 18 months, then eased back to ~$60 by end-2021.
- 2022: open interest declined almost as much as in the pandemic panic; oil then exploded to $120 on Russia's invasion of Ukraine, fell back to $70 later in 2022 with open interest crashing to even lower lows than the pandemic — which precipitated another strong rally to $90 by the fall of 2023.
The point: open interest is back at the COVID nadir — into the worst supply shortage ever
- Open interest is now back down around the Covid nadir — "astounding given this is the worst supply shortage ever seen."
- It's "mind-boggling that prices have plummeted to $70 despite the mammoth inventory drawdown that has occurred this year." Both point the same way: another reason to expect an oil-price spike in the months ahead.
Supporting positioning: record bearishness and the largest-ever USO short
- Reinforcing technicals: the high level of bearishness among futures speculators (flagged "last week") and the largest short position ever on the main oil ETF, USO.
- Per energy analyst John Kemp, bullish-vs-bearish positions are among the lowest on record over the past 15 years. His key point: "Most of these short positions will eventually have to be repurchased, creating a considerable reservoir of potential future buying and upward pressure on prices."
The demand collision: strategic-reserve replenishment
- That buyers-in-waiting dynamic will be "colliding with the planet's largest nations — and many smaller ones, like Pakistan — needing to replenish, or establish, strategic petroleum reserves."
- Net: a positioning washout (bearish extreme) plus a structural demand source (SPR rebuilds) into an acute supply shortage — the recipe for the next oil-price spike.
3. In plain English
A jargon-free summary of the thesis behind each name — what it is and why he holds that view. (Plain-language companion to the table above; renders on each ticker's consolidated page.)
USO — United States Oil Fund Positive (bullish-oil positioning signal)
USO is the biggest exchange-traded fund that simply tracks the price of oil, so it's the go-to way ordinary investors bet on crude going up or down. Right now traders have placed the largest bet against it ever — a record "short" position (borrowing and selling shares hoping to buy them back cheaper). Haymaker treats that as a contrarian buy signal for oil, not a warning.
The logic: everyone who is short has to eventually buy the shares back to close the trade, so a record short is really a giant pile of future buying waiting to happen. Stack that on top of two other extremes — the number of open oil-futures contracts ("open interest") has collapsed to its 2020 COVID-crash low even though this is the tightest oil-supply situation ever, and crude is stuck near $70 despite inventories being drawn way down this year — and every past time these gauges got this washed-out, oil went on to rally hard (roughly $18→$90 after 2020, $70→$90 after 2022). Add big countries (and smaller ones like Pakistan) needing to refill or build strategic oil reserves, and Haymaker expects an oil-price spike in the coming months. The USO mention is his shorthand for that bullish-oil setup — a read on positioning, not a specific "go buy this ETF" instruction.
Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.