oil · Confinia

Oil Calms as Bitcoin Braces for a Large Move

2026-08-09T00:00:00Z

Oil

Since my last publication, oil has indeed dropped more than 20% within seven days of my sharing that I had taken bearish exposure through put spreads.¹

CME CL move following the previous issue.

As of now, my oil book is flat again, but I’m eyeing a few key events and price levels going into the coming week, which may result in some asymmetric opportunities.

Let’s start with the objective data, events and levels before I give my personal assessment of the full picture.

While physical tightness remains undeniable,² the risk-premium compression thesis I formulated in my last publication remains intact. Looking at the past month’s Copernicus imagery alone, we’re nowhere near seeing a cliff-edge drop. By no stretch of the imagination would I say that more than 10 million barrels per day are currently offline.

https://x.com/CRUDEOIL231/status/2086009442311794877

Importantly, satellite imagery provides only a narrow assessment of flows increasingly characterized by dark transits and alternate routes.

Yes, today’s very high crack spread is bullish evidence of product scarcity and refinery demand for crude, but it is not an unqualified bullish WTI signal. Given extremely high utilization and low inventories, it is nonetheless an important counterweight to a bearish WTI thesis. The 3-2-1 crack spread is above $60.³

Understand, as the previously cited Reuters commentary explains, that record crack spreads do not signal crude scarcity; they signal a shortage of refining capacity and finished products against a crude market materially better supplied than the product market. Think about this dislocation for a second and weigh it carefully against a purely bullish interpretation. The IEA describes exactly this divergence: crude inventories began rising while constrained Middle Eastern, Russian and Asian refinery throughput left products scarce. In other words, crude is accumulating because impaired refineries cannot convert it, while gasoline and diesel command scarcity premiums.⁴

Record margins incentivize every operable refinery to maximize runs and gasoline yields. That eventually rebuilds product supply, compresses crack spreads and removes the marginal bid for crude. Crack compression is bearish for crude when it is caused by products falling relative to crude.

Backwardation remains positive but has compressed substantially: M1–M2 is $1.03 and M1–M8 is $7.02.

All of this is to say: I’m flat because the overextension is not as evident as it was in my last issue, but I’m open to taking trades as the picture becomes clearer, either through events or flows alone—both physically and microstructurally. I’m willing to do business at the following levels.

CME CL levels and curve context.

Besides geopolitical developments, a key oil event to watch this week will be the EIA Weekly Petroleum Status Report on Wednesday. I’ll be watching crude inventories excluding the SPR, Cushing inventories, gasoline and distillate inventories, refinery utilization and inputs, production, imports, exports and products supplied.⁵

Bitcoin

Bitcoin has moved remarkably little since my last issue two weeks ago, with its 12-day and 25-day EMAs compressing tightly together for several days now.

CME Bitcoin daily structure.

Consequently, implied vol is historically low; I view it as cheap. As of August 9, BTC DVOL is approximately 34.4, with only seven of the preceding 366 daily closes lower—roughly the second percentile—while August 14-expiry ATM options imply approximately 27–28% volatility.⁶

My book is, admittedly, a bit more complex than I’d like it to be. What started as clearly long exposure via spot when I wrote my last note has turned into a more complex position consisting of spot used as margin, a substantial perp short and further upside protection via a call spread. This leaves my current book approximately delta-neutral and net long optionality. I’m happy with it, though it could have been expressed more cleanly had it not been the product of a longer-term thinking process.

As a directional move materializes, these are the Bitcoin areas where I’m interested in doing business.

CME Bitcoin near-term levels.

One thing I just cannot dismiss, however, is how few anomalies we have left behind to the downside on this slow grind up.

CME Bitcoin session TPO distributions.

Monthly VWAP is the one big level around 64k, overlapping with the weekly composite POC—the composite we just cannot seem to escape from over the past two months.

CME Bitcoin composite since June 1.

I think this composite offers a highly tradable level going into tonight’s cash open: the value-area high, at around 66k, which has kept price capped over that period. Breaking out of it decisively—which I expect to be much more of a process than an event—will be key to further upside.

The key events for Bitcoin to watch will be CPI on Wednesday,⁷ the U.S. Treasury 10-year auction on Wednesday and the 30-year auction on Thursday. For CPI, I’ll be watching headline and core month-over-month inflation, shelter, core services and revisions. For the auctions, I’ll be watching the high yield relative to the when-issued yield, bid-to-cover, indirect and direct awards and dealer allocation.⁸

Oil Down, Risk On?. ↩︎
The latest releases show Cushing inventories at 20.955 million barrels, at the 2.6th percentile of weekly observations over the past decade; commercial crude inventories excluding the SPR at 406.987 million barrels, at the 1.8th percentile; gasoline inventories at 209.658 million barrels, at the 2.6th percentile; distillate inventories at 107.159 million barrels, at the 6.8th percentile; refinery utilization at 96.5%, at the 96.6th percentile; and production at 13.804 million barrels per day, at the 97.2nd percentile. EIA Weekly Petroleum Status Report. ↩︎
Reuters, July 20, 2026. ↩︎
IEA Oil Market Report, July 2026. ↩︎
EIA report and release schedule. ↩︎
Deribit DVOL methodology and data and option market data. ↩︎
BLS CPI release and release schedule. ↩︎
Treasury auction results and upcoming auctions. ↩︎

Oil Down, Risk On?

2026-07-26T00:00:00Z

I remain long Bitcoin and hold bearish WTI exposure through defined-risk put spreads.

Crude

I’d like to start with crude since it strongly influences risk assets’ trajectory.

This is not a bearish physical-oil thesis. It is a geopolitical-premium compression thesis being expressed against a truly tight physical market.

The U.S. faces several key constraints in its ongoing operations against Iran and in the Strait of Hormuz. These make me believe that U.S. attempts to rekindle an MOU are credible. The most relevant constraint for my analysis is the broader cost of such a conflict beyond the immediate military expense. I warned at the very early stages of this conflict, when the market was still pricing several rate cuts for this year, that oil would become a pass-through issue. This has since materialized and has, at minimum, accelerated a selloff that has left the Nasdaq 10% below its highs.

I therefore believe that some form of MOU, or at least a tacit—though fragile—ceasefire, is imminent and could come this week.¹

I was long oil at the very bottom of the MOU period ($68)² and am now adding short exposure after a rise of almost 40% from that long setup.

It’s important that this setup is coherent from the broad thesis all the way down to the microstructure expression.

CME CL weekly TPO.

CME CL higher-time-frame structure.

The strongest counterargument is the physical market itself. Cushing inventories sit at roughly the 0.3 percentile of their ten-year range, commercial crude and gasoline near the 4th, and distillates near the 10th. The WTI curve, as of July 24, is correspondingly tight: about $4.16 in backwardation from M1 to M2 and $14.63 from M1 to M8—while managed-money net length is only around the 7th percentile of its ten-year history.³ I therefore cannot credibly claim “loose balances and crowded longs.” This is specifically a thesis based on the expectation that the geopolitical premium compresses faster than physical scarcity can support the prompt contract, which is also why I am expressing it through defined-risk put spreads.

The microstructure picture further supports this thesis.

Bitcoin

Such a de-escalation would, of course, be excellent news for risk assets, but even among them, Bitcoin remains an outlier.

It showed initial signs of a structural shift last week, flipping key levels and even retesting them: the 30-day rolling VWAP, 50-day moving average, 12/25-day EMA trend and, most importantly to me, re-entering and committing to yearly-VWAP value. I remain broadly confident as long as price remains accepted here; invalidation of this higher-time-frame bullish bias should be clear from the chart below.

Bitcoin’s higher-time-frame structure.

The microstructure expression of this shift is also visible on lower time frames. After I shared that I was buying the 64k monthly-VWAP retest,⁴ Bitcoin bounced from there over the weekend.

Bitcoin exerted strength around key levels throughout last week.

Importantly, the move has not required visibly elevated perp funding or expanding Bitcoin open interest. It has respected relevant levels across numerous time frames, from monthly VWAP and value down to weekly VWAP and taker anomalies, alongside very healthy maker flow.

A catalyst such as the one discussed in the first part of this note could well push us beyond 65.5k and turn the current excursion into another healthy higher low.

CME BTC RTH/ETH TPO.

Note that I see this as a short-term catalyst for a stab higher. De-escalation would remove an important marginal oil and inflation shock, but it would not by itself create a clean easing backdrop: the 10-year real yield is still 2.43%, around the 99.5th percentile of the past decade, with the nominal 10-year at 4.69%.⁵

Reuters, July 26, 2026. ↩︎
The original oil setup. ↩︎
Inventory percentiles are calculated over ten years of EIA weekly petroleum data and Cushing history; managed-money positioning uses the CFTC Commitments of Traders report. Curve values use July 24 CME WTI settlements. ↩︎
The 64k monthly-VWAP retest. ↩︎
U.S. Treasury rates for July 24, 2026: nominal yield curve and real yield curve. ↩︎