The Calm Before Oil's Next Contango Trade ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 

Katusa's Investment Insights Oil is Flashing the Same Signal It Did Before the 2014 Crash By Marin Katusa Get real-time alerts right away. Follow on X: @KatusaResearch and @MarinKatusa The last time oil looked this boring, it crashed 70% over the next 18 months. WTI has traded sideways for six months now, where every rally fades. Every dip gets bought. Goldman Sachs even turned bearish and most traders have moved on. We've been cautious too. But the supply data just changed and it's flashing the same warning it did in late 2014. That warning preceded the best contango trade in a decade.   Oil’s Supply Side Triggered a Shift This chart captures the current mood in the oil market. Five consecutive monthly declines have pushed sentiment toward fatigue rather than panic. Prices continue to drift lower without triggering forced selling. This pattern often appears when surplus conditions build beneath the surface.   OPEC’s Role… OPEC increased production through 2025 and hinted at further additions in 2026. Simultaneously, demand growth slowed down. China’s economic recovery lost steam, freight rates remained weak, and global trade failed to gain sufficient momentum to absorb the excess barrels in the system. Venezuelan exports to the US stepped up. Production recovered to around one million barrels per day. Russian crude isn’t coming back just yet, but if there’s a resolution in Ukraine, it could unleash another wave of oil into the global supply. Put all this together: supply keeps climbing while demand lags. And that imbalance is now showing up clearly in the data… Supply is set to outpace demand through early 2026, and the surplus could approach seven million barrels per day by Q1. That level edges close to the extremes last seen during the COVID collapse.   Why Saudi Arabia Wants Lower Prices Saudi Arabia has the cheapest oil on earth. When prices drop, high-cost producers bleed. Saudi gains market share. This time, the strategy has a second target: Russia. Russia’s oil income has already dropped thanks to sanctions and forced discounts. Low prices squeeze them harder. The late 1980s oil crash helped break the Soviet economy. Saudi remembers. The kingdom has balanced ties with Moscow and Washington for years. Right now, Riyadh leans toward the White House.   Why Washington Won’t Stop It Cheap crude helps the Trump administration fight inflation. Refiners earn fatter margins on cheaper feedstock. The Strategic Petroleum Reserve gets refilled at bargain prices. A weaker Russia reshapes global supply and leaves the U.S. as the only large non-OPEC exporter with real scale. China benefits too. Both superpowers see value in a soft oil market. That alignment explains why supply keeps rising even as prices stay flat.   The Contango Trade Is Forming When supply runs far ahead of demand, the market slips into contango. Spot prices drop because there’s too much oil today. Future prices stay higher because traders expect the glut to fade. That gap creates a simple trade. Buyers grab cheap crude now, store it, then sell futures at the higher forward price. Strategic reserves get refilled. Tanks fill up. Tankers turn into floating storage. Refiners lock in strong margins because their input costs stay low. This pattern showed up after the 2008 financial crisis, during the 2014-2016 price war, and again during COVID. Each time, the same group of stocks outperformed. Each time, most investors missed the setup because prices looked “boring” on the surface. WTI futures already slope upward. The early signs of contango are here. The spread between spot and 12-month futures has started to widen… Today’s curve looks a lot like the one we saw in 2014. The same early surplus, the same flattening spot price, and the same slow bend upward in the forwards. But two things make this cycle different. Saudi and the U.S. now have aligned interests in keeping prices soft. Interest rates sit much higher than they did a decade ago. Higher rates increase storage costs, eating into carry-trade profits. And expected rate cuts by Q1 2026 will likely make the economics even more attractive.   Back to the Future: Which Stocks Won and Lost In 2014 During the 2014-2016 price war, tanker stocks were the clear winners. Floating storage demand exploded. Frontline and Euronav surged as traders scrambled for places to park cheap crude. Refiners outperformed because they bought cheap crude and sold finished fuels at stronger margins. Their input costs dropped faster than their product prices. Producers got crushed. High-cost shale names and leveraged drillers saw margins collapse. Many cut drilling or shut in wells. Some, like Linn Energy, went bankrupt. The pain lasted for two years. The lesson: in a surplus cycle, the companies that move oil beat the companies that pump it. The market still looks calm on the surface. But the pieces now sit in the same places that triggered the strongest contango runs of the last decade. Once the surplus peaks and the curve locks in, the window opens, and it doesn’t stay open long. In the next issue of Katusa’s Resource Opportunities, we’ll dig into the companies built for this cycle and how we can profit from Contango. There are a lot of opportunities in oil stocks right now. And it’s time to hunt. Regards, Marin Katusa Copyright © 2026, Katusa Research, All rights reserved.   Details and Disclosures   Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything.

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