Don't Bear-Hug a Coiled Spring: How Eric Nuttall Predicted the Violent 26% Surge in WTI Crude
When paper contracts clash with physical scarcity, a $19 surge in WTI crude proves that shorting oil on drained reserves is a high-stakes gamble.
When financial markets build a heavy consensus based entirely on paper trades while ignoring physical fundamentals, gravity eventually asserts itself with violent force.
Mid-July 2026 provided an absolute masterclass in market mechanics as West Texas Intermediate crude futures executed a breathtaking surge from roughly $73 per barrel up to $92.09 per barrel in a mere ten days. The violent upward repricing sent shockwaves through energy trading desks, leaving macro hedge funds scrambling to cover short positions that had grown dangerously overcrowded.
The explosive rally came as no surprise to energy insiders who had been tracking the underlying physical data. Eric Nuttall, Senior Portfolio Manager at Ninepoint Partners LP, outlined the coiled spring setup in mid-July. Nuttall highlighted a potent cocktail of paper positioning pushed near negative territory, a depleted U.S. Strategic Petroleum Reserve operating near historical minimums, an impending end to buyer strikes in China, and escalating U.S.-Iran geopolitical risk. Investors following fund vehicles such as the Ninepoint Energy Fund (TSX: NNRG) witnessed firsthand how rapidly paper market sentiment disintegrates when forced to confront dwindling real-world inventories.
Nuttall was far from the only expert pointing at the ticking clock. Energy researcher Rory Johnston of Commodity Context consistently warned that relying on drained strategic reserves created a false sense of safety, leaving financial short-sellers completely exposed once buffers reached operational floors. Specialized natural resource investment firm Goehring & Rozencwajg similarly argued that short-sellers were misinterpreting temporary inventory fluctuations as structural demand weakness. Over at Bloomberg LP, energy columnist Javier Blas repeatedly noted that paper energy markets had grown absurdly crowded on the short side, warning that treating crude solely as a paper recession play was a high-stakes gamble.
When physical supply friction and shipping disruptions in the Middle East materialized in late July, the trap snapped shut. Forced short-covering triggered a textbook feedback loop, driving prices higher by more than 26 percent in under two weeks. Energy equities that had been pricing in oil at discounted levels quickly caught fire, boosting major producers such as Cenovus Energy Inc. (TSX: CVE), Suncor Energy Inc. (TSX: SU), Ovintiv Inc. (NYSE: OVV), and Devon Energy Corporation (NYSE: DVN). As Josh Young of Bison Interests had maintained throughout the selloff, the disconnect between paper bearishness and physical realities laid the groundwork for massive asymmetric upside.
Ultimately, the July crude squeeze serves as a stark reminder for macro traders: while paper contracts can dictate commodity prices in the short term, paper barrels cannot power a refinery. When speculative short positions reach extreme highs while real-world buffers evaporate, all it takes is a single spark to turn an orderly market exit into a frantic stampede.
Sources
- Ninepoint Energy Market Updates and Strategy Commentary, Ninepoint Partners LP (June–July 2026).
- WTI Crude Futures Price Action and Strait Shipping Risk Analysis, TradingKey (July 23, 2026).
- Crude Oil Market Forecasts and Kalshi Prediction Positioning, Seeking Alpha (July 23, 2026).
- Ninepoint Energy Fund ETF Holdings and TMX Performance Metrics, TSX / TMX Money (July 2026).