Another 411
OPEC Squeezing
In this report: C.O.T in depth analysis, What are the institutional traders doing, Trade charts, Steel tariffs to nuke Permian drilling costs, OPEC hike 411bpd for July.
Monthly book recommendation: ‘Oil’- (There will be blood) by Upton Sinclair. The book the movie was based on.
View
OPEC just opened the taps again — and this time, it’s not about price, it’s about power.”
OPEC+ announced on May 31, 2025, a production increase of 411,000 barrels per day (bpd) for July, marking the third consecutive monthly hike as part of a strategy to unwind the 2.2 million bpd voluntary cuts initiated in 2022. I have no doubt this will bring in a BONE SHAKING drop in oil prices through the rest of 2025 as there is NO certainty they will stop at this. What is gained?
Squeeze marginal producers in North America by forcing prices below their breakevens. $41 in The Permian Basin. See ‘Dower Dallas’ for more.
Appease Donald Trumps desire for lower oil-at the cost of U.S. oil industry jobs.
Teach Kazakhstan a lesson for over producing above provided quotas.
There is no bullish thesis. Front price wise, the most bullish thing that could happen is that we have a fast flush out to the downside, which would cause mean reversion up higher to the current average price on WTI $67s. I do not see this happening.
See below for trade thesis and price movements I would get involved in.
Articles
Trump says he plans to double steel, aluminium tariffs to 50%
Video: How Gulf Oil Giants Are Buying Global Power
Chevron to Cut 800 Jobs in the Permian
Inventory data
We are seeing global levels are rising. One would be forgiven for thinking that China was getting ready for something big-given the storage builds. Thanks to Vortexa for the charts.
Commitment of traders analysis.
WTI
On the net change, we can see big changes across each participant.
Small Specs
Small specs net: 812% (net change 3039 contracts) They are getting off the bench from extremely low all time participation levels. They have increased their long position +3.3% +1812 contracts, while decreasing short position by -2.2%. -1227 contracts. They are long and its not going to work out for them in my mind in the face of OPEC additions. An unfortunate classic retail mindset of buying something when you think it’s cheap, only for it to be set to get a lot cheaper.
Large specs
Notable increases in short positioning and reduction in longs. You can see below the divergence on Large spec positioning. Shorts increasing 7.3% over shorts reduced by 3%. A clear indication smart money is short this market.
Positioning on the all-time data sample is relatively high but not essentially ‘crowded’, however if we look at the past 5yrs of large spec shorts (chart below), we are in the 87th percentile. This can remain elevated in my mind, if not get a lot higher over the coming 2 months. When OPEC gets to work raising production, you don’t want to try to fade the downside. I think we are only at the start of what will lead to crowding short in the coming weeks from Large Specs.
Another element to note here is the earlier than usual inflection up on the 2025 (red) curve below. This is confirmation for me (for what I have suspected since early Feb) that the market is pulling all seasonal curves forward by 3 to 4 weeks. For spread traders and active managers, this IS ESSENTIAL INFORMATION.
Commercials
It is interesting if we take a large perspective on commercials positioning. Given that June 2014 was the start of the last OPEC market share war that brought us into the $30 price range in 2016, we can see that Commercials are hedged (short) at the same levels. They are not however carrying the same level of long positions as they were last time. They are ready for a downward shock this time, carrying less upside insurance/downside risk. This leads me to believe a downside move here will be more controlled and slower than the last time, ie. 2014-2016.
Looking at the last 10 years, we can see Commercials are net crowded in the 98th percentile. This speaks more to hedging levels being very high, bolstering the narrative that they are ready for an outsized large move lower.
TRADE
Trade Setup Summary:
Bias: Bearish
Levels to Watch: $57.88 → $55.12 → $50.28
Triggers: Watch for weak short flush between overnight & NYMEX open
COT Signal: Large specs accelerating short positions (+87th percentile crowding)As outlined above, we have seen small specs were +1880 contracts longer as of last Tuesday, (C.O.T Captures data on a Tuesday, publishes the following Friday). With large specs +10678 contracts more short, it’s easy to see the move will be fluid to the downside on re-open.
If this report gave you an edge, a like or share keeps this rolling. I appreciate every one of you.
Best of luck traders. We will be watching.