Traders Aggressively Short Crude Oil, Betting Hormuz Crisis Is Nearing Resolution
Taylor Wilson
Brent crude short positions have tripled from late March to early June, as traders bet the Strait of Hormuz will reopen soon. But the physical market is losing roughly 13 million barrels per day — and global inventories are draining at a record pace. The gap between paper bets and physical reality keeps widening.
What exactly are the shorts betting on?
COT data — Commitments of Traders reports, which track how large players are positioned — compiled by analyst John Kemp show Brent short positions at their highest since January as of June 2.
This means → traders are collectively wagering that a ceasefire deal lands before buffers run out, the strait reopens, and supply returns, pushing prices down.
Long positions have been sold off for eight straight weeks. Total open interest on ICE Brent has fallen to its lowest since August 2025 — shorts are piling in, and many others have simply stepped aside.
What is the physical market actually saying?
The IEA's May report shows the Hormuz disruption has removed roughly 13 million barrels per day from global supply.
From March to April, global observable inventories — including oil in transit — fell by 250 million barrels, or about 4 million barrels per day. The IEA called it a record drawdown pace.
In plain terms = paper traders are betting prices fall, but actual oil in storage is disappearing faster than ever. The two sides are telling completely opposite stories.
Can U.S. inventories hold up?
Cushing, Oklahoma — the key delivery hub for WTI futures — is only weeks away from minimum operating levels.
Chevron CEO Mike Wirth said in late May: "Buffers and shock absorbers are steadily depleting. The market's ability to absorb this imbalance has weakened significantly."
He expects pressure to hit physical prices more directly in June and especially July, with upward price pressure intensifying.
If a ceasefire happens, would prices drop right away?
The ceasefire is tested almost daily — Israeli strikes on Lebanon, U.S. "defensive" actions against Iran, Iranian retaliation — each round rattling a fragile truce.
Even if the strait fully reopens, supply will not arrive immediately. Shipowners need safety guarantees, and tanker cargoes take weeks to reach buyers.
This means → even a deal signed tomorrow would not put oil on the market tomorrow. That gap lands squarely in peak summer demand season.
Where is the tipping point in this bull-bear standoff?
Paper markets have bet on an "imminent deal" for three and a half months straight. Each time a deal seemed close, sell-offs followed — then fresh military action triggered renewed buying.
ING strategists wrote: with no imminent deal in sight and the market tightening every day, prices have room to rise — especially if disruptions extend into Q3, the seasonally strongest demand period.
This reflects a core contradiction: when the reality of depleted inventories finally overwhelms the expectation of a ceasefire, the current short thesis faces a sharp squeeze.
Content is for reference only, not financial advice.