Goldman Saw "Record Physical Buying" In WTI As War Started

Commitment of Traders encapsulating the outset of the Iran War exhibited record physical buying, according to top Goldman Sachs futures trader, Robert Quinn.

Specifically, the Producer / Merchant / Processor / User category purchased +$3.7bn during February 24th - March 3rd, marking the largest 1 week notional amount for at least the past 10 years.

New longs (+$1.8bn) and short covering (+$1.9b) contributed.

Managed Money demand underwhelmed. 

Managed Money bought +$800mm. Downside reduction (+$1.7bn) was the sole driver. Longs actually declined (-$900mm).

As the conflict subsequently escalated, longs initiated. 

From March 3rd - 6th, WTI surged +22%. Straight of Hormuz flows nosedived and attacks grew more severe, with the targeting of desalination plants and energy infrastructure. Coincidentally, aggregate open interest (OI) rose +$3.2bn.

However Trump's softer rhetoric forced a quick unwind.

 Over March 6th - 10th, WTI retraced -8%, mainly due to President Trump's assertion that the war is nearing completion.

WTI aggregate open interest also fell (-$4.9bn). While there are many moving components, the general OI reversal undermines claims of large short sellers.

Notably, the extent of speculative participation remains questionable. 

The option market reflected incremental upside posturing; 3 month implied volatility remained bid and normalized 25 delta put-call skew cheapened to record lows.

However per GS Futures Strategists' framework, elevated realized volatility forced CTA liquidation.

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