Title: Updated Thoughts on Oil with Charts Show: Paulo Macro (Substack) — paid Guest: Paulo Macro ("Cloudbear") Date: 2026-MAY-22 URL: https://paulomacro.substack.com/p/updated-thoughts-on-oil-with-charts Length: written post (no timestamps) Note: Back-filled post (processed 2026-JUL-07). Post byline reads MAY 22, 2026 (subtitle "Fri 21 May 2026" — folder stays 2026-may-22 per the byline). A chart-driven oil update: products (US gasoline, European jet, Asian fuel oil/middle distillates) are the most acute problem; PADD1 (US East Coast) gasoline scarce into an early Memorial Day with low EU imports; Cushing (WTI delivery point) cratering toward operational minimums (~20mmbbls); US commercial crude "baked in the cake" below 400mm by July on declining imports (tankers ballasting in empty), refiners ramping into driving season and no demand destruction on a $50+ crack. His conclusion: the US must price out gasoline exports in 2-3 weeks and crude 4-6 weeks after, "or…". Notes the confounding tape (an "Arabiya plant" headline ripped equities on a weak +1500 TICK, then Al Arabiya denied the report 7 mins before the close), open interest not progressing since January despite higher lows, spec futures positioning below 200k net long (replaced by options), managed-money net long ~$40bn (mostly Brent on export-ban fears) — far from record — and WTI spec net long down from 11% of OI in late March to 8.6%. Position: continues long BNO (Brent front-month ETF, roll-yield accretive) plus calls, and this week layered in shorter-term WTI callspreads given the light positioning; still thinks a US export ban is highly likely and watches for a compression in the WTI-Brent discount as the tell. Body reproduced for personal study; Substack chrome removed, wording otherwise verbatim.
A lot of charts today and some thoughts to flesh out that would make Friday's chat opener a bit too long, so here goes…
MS's weekly inventory data run continues to shock but not surprise. Bottom line is products (gasoline in the US, jet in Europe, fuel oil and middle distillates in Asia, etc) continue to be the most acute problems right in front of us.
Crude and product stocks globally:
Regionally… Fujairah products appear to be at operational minimums:
Gasoline in the US is a problem. As reader Chris reminds us:
PADD 1 is 40% of US gas demand, of that 15-20% is imports and the majority is from EU. Memorial Day a week early is not allowing any time to build supply coupled with much lower imports from EU. Last week imports went to 547kb from 303kb in reaction to a price spike. Inventories still drew 1.5mmbbls. With inventories declining like this everywhere, seasonal demand increasing +500kbpd in summer driving season, i think it's going to be a price war to secure product.
Reminder that PADD1 is East Coast:
Middle distillates (diesel, jet fuel, heating oil, kerosene) are also tight globally with little room for draws in Asia:
Fuel oil (including bunker) is a problem — can't run ships without it, and even if ships start to move in SoH tomorrow, the fuel comes first.
In the US, Cushing (WTI futures delivery point) is cratering toward operational minimums of ~20mmbbls. Commercial crude draws are being masked/supplemented by SPR releases (and competing for pipeline takeaway capacity vs. SPR) but the direction of travel is clear — we will be below 400mm in July and that is baked in the cake on a combination of declining imports (tankers ballasting to US, i.e. arriving empty = they are taking, not dropping off), refiners ramping into driving season, and no signs of US demand destruction.
The US will have to price out exports of gasoline in the coming 2-3 weeks (operational minimums become stressed at 200mmbbls). Crude should follow 4-6 weeks thereafter (operational minimums are ~370mmbbls for commercial and SPR minimums somewhere around 170mm). Sub-$100 crude is nowhere near what people are calling "demand destruction" levels given we are just not seeing consumer demand destruction on a $50+ crack. So either we price out US crude exports between now and August, or…
It's really that simple.
Parting word on today. It really is hard to believe that we have gotten this stupid so clearly something else is going on. Note the comments back on this post — everyone is in on the joke and well aware the market reactions are confounding. It's public knowledge that the market is not discovering price. The Arabiya plant today clearly looked like something lifted from a Telegram/Signal group.
The equity market ripped, although oddly we barely mustered a +1500 TICK when past speculation would have seen a much harder upside grab in index products and commensurate TICK (today's bounce was weak by comparison, and we closed off the highs).
But amazingly it was Arabiya itself a mere 7 mins before the close that denied unfounded reports initially circulated by Iranian media attributed to Arabiya, despite Iranian officials also denying negotiations were anywhere near close.
While such oil selloffs are frustrating for bulls like me and disconcerting in a "what am I missing" paranoid way when price is not concerning something that seems so obvious on the "mafs," it is interesting to note that open interest is not making any progress since January (lows/circles denote monthly futures rolls) while we have been making progressively higher lows since mid-April on the ceasefire… this divergence interests me:
You can also see that speculative futures positioning is below 200k contracts net long, being replaced by options as futures have become impossible to hold in an environment where tweets whip everything around several dollars in a day:
And managed money net long notional in WTI + Brent futures, while extended and far above the flat position in December (something I noted in my bullish oil note back in mid January here), is nowhere near record levels of exposure at ~$40bln (and the vast majority of the position is held in Brent, likely on fears of an eventual US export ban or other policy interventions):
And the WTI speculative net long as a percent of open interest has fallen from 11% in late March to 8.6% now. In the context of overall speculative interest vs prior periods since the GFC when WTI traded around $100/bbl (2011-2014, 2022)… 8.6% is really not a lot:
I continue to be long BNO (Brent front month ETF which accretes the roll yield), an assortment of calls therein, but this week I have layered in shorter-term callspreads in WTI given the significant lack of positioning. It's dangerous, because I still think export restrictions are highly likely (selective export to "friends"…sorry Europe), but as Hartnett used to say years ago…
Markets stop panicking when policymakers start panicking.
The crude oil market is keeping Trump from panicking, because crude has not panicked. Crude has to go to levels first where he has to decide whether the market prices out crude exports, or he decides to line out exports. But we have to go there first. I think the biggest tell that export restrictions are coming is seeing a significant compression in the WTI-Brent discount first.
Parting thought on this, voiced not only by me but several pals today in different forums:
If everything was fine, why all the jawboning and oil market management (verbal, and perhaps otherwise)?
If we are so close to a real deal, why wave their arms around so much? Surely they could wait a couple days… unless something else is going to happen? Why the desperation?
The successive media storm suggests all is not well here. Stay frosty out there.
Hope everyone enjoys a relaxing Memorial Day weekend.
As always, kindly yours,
Paulo aka Cloudbear