WTI breached our $38/$48 forecast this week as supply disruptions in Nigeria, Latin American and Africa (estimated by Morgan Stanley to be ~2m bpd in total) took center stage. Seeing technical strength in the current rally but fair value for oil in the mid $40s, we continue to wait for a move above $50 to get short flat price. Our bearish view of a +$50 WTI scenario is based on 1.) record inventory gluts at storage hubs from Cushing to Rotterdam exacerbated by supply gains from core OPEC members and improved hedging opportunities for U.S. producers 2.) demand risks of decreased Chinese stockpiling as prices increase and poor global refining margins 3.) waning bullish sentiment as evidenced by recent COT and USO data and 4.) potential for more USD strength with a June rate hike possible. Lastly, we aren’t impressed with a market that can’t […]