Well goddammit I told you so.

I don’t how many times I’ve said that oil will almost invariably head lower (and maybe sharply lower) once everyone gets sick and tired of waiting around for something that, to be brutally honest with you, isn’t f**king coming.

The whole production cut agreement was a farce from the get-go because you can’t really call something a “cut” when you ramped up production going into it. That is, if the baseline from which you’re cutting is elevated relative to recent history, well then you aren’t really “cutting”, are you? Here’s a visual reminder of what the setup was:

(Bloomberg)

So ironically, the cuts will probably need to be extended just to make up for the pre-cut production ramp. Throw in the upsurge in US activity and resultant record high US stockpiles…

…and you’ve got yourself the recipe for a deflationary supply glut and attendant plunge in prices. Sure enough, crude collapsed on Wednesday as the reality of the latest API/EIA numbers kicked in.

Fast forward to Thursday aaaand…. it’s gone. It’s all gone. The entire post-OPEC-cut gain has evaporated… 

Cue Keyser Söze..

You might remember what I said on Wednesday afternoon. To wit:

Sure enough…

“We’ve been seeing long positions on record levels, so many people bet on rising prices, which didn’t occur,” Gerrit Zambo, a trader at BayernLB told Bloomberg by phone. “The production-cuts story also isn’t biting.” 

No Gerrit, it sure isn’t.

So, coming full circle, this is when I get to say “I told you so” and ask that you politely recall the following which you hopefully read here two weeks ago…

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