Brent and West Texas Intermediate (WTI) oil prices have fallen around 9% from their late April highs to their early May lows amid a spate of concerns including: Trends in US oil production, OPEC’s commitment to recent supply reductions, rising US oil inventories, the health of the global economy and the pote ntial for a destabilizing US-China trade war.

All told, some of these factors appear eerily reminiscent of last October, the start of a serious sell-off in oil that saw WTI prices plummet from $76.90/bbl to the low $40s and Brent to fall from $86.74 to under $50/bbl.

Late last year, we took a look at supply and demand conditions in global oil markets and (correctly) predicted that the selling pressure was near an exhaustion point and that prices would see a sharp recovery into 2019.

With our targets for crude now achieved, and market volatility on the rise, it’s time for an updated deep dive into the oil markets.

Our conclusion: This is not the beginning of another late 2018 style market swoon nor are we seeing any evidence of excess global oil supplies. Rather we see the recent sell-off as a correction driven largely by hedge fund profit-taking following a record-setting start to 2019 for crude.

In this issue, we update our outlook for crude and explain some of the surprising factors behind last week’s larger-than-expected build in US oil inventories.