A seasoned commodities veteran warns of a severe disconnect between current financial markets and the physical commodities market. He likens the extreme complacency of US stock investors to "children on a beach" oblivious to distant danger. Furthermore, he argues that the ultimate bottleneck for trillion-dollar AI computing investments will be fossil fuels, which are heading towards a genuine shortage.
On May 8th, Amrita Sen, Head of Research at Energy Aspects (EA), held an in-depth discussion with Jeff Currie, a Wall Street veteran, former head of commodities research at Goldman Sachs, and current co-chairman of Abaxx Exchange. In the interview, Currie expressed strong astonishment at the "massive disconnect" emerging between the physical commodities market and the financial/equity markets.
Despite escalating geopolitical conflicts and supply chain disruptions, physical goods are even trading at a premium in the spot market. Yet, equity markets, particularly US stocks, continue to hit new highs. To describe this contrast, he used a vivid analogy: "The current US stock market is like a scene from the movie 'Jaws'—the beach is open, all the kids are running around, and you can clearly see the shark fin cruising along the shoreline."
Currie believes Wall Street has been slow to react to consecutive, larger-than-expected declines in crude oil inventories. He finds this level of "complacency" baffling, unable to comprehend why people can be "so oblivious to the severe shock that's coming." He stated plainly that while he can explain what's happening in the oil market, the frenzy in the US stock market leaves him "absolutely dumbfounded."
Don't Confuse 'Deficit' with 'Shortage': Depleted Diesel Stocks Are Key Addressing why oil prices have retreated, Currie highlighted a crucial framework distinction: the market is in a 'deficit' but not yet a 'shortage.' "This is how I think about oil: there's a big difference between a deficit and a shortage. We are in a deficit, demand is above supply, we are drawing down inventories. So you're borrowing oil from the future right now, and you'll keep borrowing until you hit the absolute minimum operating level in the tanks," Currie explained. He urged the market to pay close attention to the "pain point" of US distillate (diesel) inventories. "I just know US distillate stocks are at 102 [million barrels], and a few weeks ago they were at 120. If you go from 120 to 102, you're about to run out, and right as you're entering the peak summer driving season," he noted. He pointed out that in the historical experience of oil trading, "100" has always been a critical threshold number. Once breached, the market will truly feel the power of a "shortage."
The Essence of AI Computing: "Dirt and Diesel" When discussing the AI craze sweeping Wall Street, some argue that as GDP becomes less energy-intensive and tech giants plan up to $1 trillion in AI capital expenditure next year, Middle Eastern geopolitics or oil no longer matter. Currie strongly refuted this view. "They're spending as if AI compute is infinite," Currie countered. "What is the biggest input into AI compute? It's called oil, energy, diesel, natural gas—call it whatever you want." He pointed out the current absurdity in the market: tech enthusiasts don't even ask the price of AI compute, defaulting it to zero. "You can even say you don't need natural gas and oil, but how do hyperscale compute platforms deliver what they promise without natural gas? Almost all commodities, including copper, are ultimately just 'dirt and diesel.' If you run out of diesel, you have a big problem."
Long-Dated Crude Severely Mispriced, Passive Funds May Face "Forced Rotation" Regarding macro re-rating and investment opportunities, Currie believes the biggest mispricing opportunity in commodities lies in long-dated crude oil. The back end of the crude futures curve remains around $70-77, which does not reflect the real structural supply-demand dynamics. He noted that once a physical shortage erupts, not only will front-month prices spike, but long-dated prices and traditional energy companies (like ExxonMobil, Shell, etc.) will also face significant revaluation due to production cost inflation. Currie outlined a potential transmission chain for US stocks: the energy sector's weight in the S&P 500 is currently just over 2%. "If energy goes up 30%, for a 2% weight, the market doesn't care. But when energy weight eventually climbs to 5% of the index, they will have a serious problem. Since most money is passive, they will have to sell Nvidia and other tech stocks, forced to reallocate into hard assets like energy." This would trigger a self-reinforcing sector rotation.
The following is a full transcript of the interview.
Sen: Unfortunately, the conflict continues. It's great to speak with you again; we had a conversation before. Indeed, we haven't spoken since the US-Iran tensions escalated. My first question is, are two things surprising you: first, the current level of oil prices, and second, the severe dislocation between the physical market and the financial paper market. Even now, traders tell me physical crude cargoes command a significant premium to paper. How do you view this current situation?
Currie: I can still make sense of the crude oil market situation, but the stock market trend is completely elusive to me. Indeed, the stock market trend also puzzles me greatly. This week, in an interview with Bloomberg, I used the movie 'Jaws' as a metaphor. It's like in the film when they declare the beach open again, children rush to the shore, completely unaware that shark fins have quietly appeared near the coastline. This analogy is very apt. Take the crude inventory data from two weeks ago, which showed a sharp draw of 25 million barrels. Those of us who have been in this industry for years know that such a large drawdown during the crude demand off-season is unusual. Then the API data showed another 25 million barrel draw, but when the official data later came out showing only an 11 million barrel draw, the market immediately relaxed, thinking the situation had eased. This mindset is far too complacent. I truly cannot understand why the market is ignoring the impending severe crisis.
Sen: So you believe the current oil price is just a matter of timing, and the real turning point hasn't arrived yet?
Currie: In my view, a crude market supply-demand deficit and a physical shortage are two completely different concepts. The current market is only in a deficit state, where total demand exceeds supply, and the market is continuously drawing down crude inventories. This is equivalent to drawing on future crude reserves in advance, and this state will continue until inventories hit the minimum operating reserve level. Major banks are still debating the specific numerical value of the minimum safe crude inventory level, but that number is actually irrelevant. I only know that US distillate stocks have fallen from 120 a few weeks ago to 102 now. We are right at the start of the peak summer fuel season for travel, and the situation with distillate inventories and prices is already precarious. I really don't understand what the market is still debating. Many even think we can completely drain all 100 million barrels of reserve crude, but even if those reserves were exhausted, the problem of crude supply shortage would still not be resolved. Let me analyze the current situation. First, many market participants naively believe crude inventories can be completely emptied. Some have even told me the world has 8 billion barrels of crude in storage. But the reality is, out of those 8 billion barrels, 20% is tank bottoms that cannot be moved, and a large amount is tied up in infrastructure and other uses,根本无法投入市场流通. I've been compiling relevant data recently and will release it soon. At the start of the year, the actual crude surplus was far larger than commonly perceived. At the beginning of the conflict, the global crude market had a surplus of 375 million barrels, all accumulated from last year. This is precisely why the market currently only has a deficit, not yet a tangible physical shortage. I expect a turning point in the crude market around late May to early June. The previous oil price rally followed by a rapid retreat is precisely what has fostered this complacent sentiment. The public mistakenly believes the crisis in the crude market has been resolved, which is the market mentality I find hardest to understand. I've contacted many industry friends in Asia to understand the situation and found that Trump's policy stance is inconsistent. It's not hard to see that whenever the US 10-year Treasury yield approaches 4.4%, he becomes eager to push for various negotiation agreements. What he truly fears is high interest rates, and oil prices directly determine the US economic breakeven point. Stabilizing oil prices allows control over domestic interest rate trends. Interest expense is the US government's second-largest expenditure, which is his core motivation for wanting to de-escalate. Industry insiders in Asia generally believe the current situation is completely controlled by the US, but we all know that's not the case. As early as March, I realized this confrontation had little chance of a quick resolution. Some asked if I had considered the perspective of the opposing side. As I mentioned last time, their situation is akin to Afghanistan's—relying on complex terrain to deploy rocket launchers and drones, making it impossible for external forces to forcibly open shipping lanes. While there is a possibility for negotiation and settlement, the US remains firm on its stance regarding issues like uranium enrichment. From Iran's perspective, having been attacked multiple times by airstrikes, it will inevitably demand war reparations, which is a core矛盾难以达成共识. Furthermore, the information battlefield is highly polarized. In the eyes of the American public, the US is winning the online information war. But looking at other regions globally, public opinion leans heavily towards Iran. My seven-year-old daughter in school in London hears related talk that is eye-opening. Most Americans are completely unaware of this,归根结底,是他们完全看不清当下复杂的地缘局势. The core of this conflict has never been simply about missile exchanges; the key issue has always been the blockade of shipping lanes. This morning, Trump publicly stated that his only goal is to open the shipping lanes, but those lanes were open two months ago. This rhetoric is undoubtedly continuously lowering his own negotiation底线. The US Treasury trend you mentioned is also crucial. Currently, the two most important market indicators are the stock market and the US 10-year Treasury yield. Clients often ask me what my most confident trade is. Besides oil-related positions, I consistently believe buying S&P 500 put options is a prudent choice, a direction I've long favored. Previously, the market expected the 10-year yield to rise to 4.5%. Now there are various peace negotiation rumors, but no substantial progress. If the yield continues to climb to 4.6%, 4.7%, the US will be forced to actively seek a settlement. I recently returned from a trip to the Middle East. Local industry insiders are extremely pessimistic about the prospects of reopening shipping lanes, believing not only that it will be difficult to resume navigation in the short term but even if it does restart eventually, the process will be fraught with difficulties. Additionally, Trump is also hoping for sovereign wealth funds from Gulf countries like Qatar, the UAE, and Saudi Arabia to fund a $700 billion investment in the AI sector. Combined with the upcoming SpaceX IPO, there is a huge funding需求无处筹措, and the credit market simply cannot support such a massive funding gap—a reality largely ignored by the market. From Iran's perspective, having suffered multiple airstrikes in recent years and with past agreements never safeguarding its interests, demanding war reparations and charging shipping passage fees are reasonable demands. From the beginning, I was convinced this confrontation would not end easily. Looking at the Red Sea situation provides a clue. Despite airstrikes by multiple countries against the Houthis, whose capabilities are far inferior to Iran's, Red Sea shipping traffic remains down 75% to this day. Currently, crude oil transport in the Red Sea is勉强运转. From this, it's不难判断 that a substantial improvement in the overall situation is unlikely. There are rumors Trump is about to meet with Shiite-related forces, with specific news expected around 10 PM New York time tonight. The American public remains盲目认为 that the US economy and markets are insulated from all external risks,坚信 the US will be the ultimate winner. Undeniably, recent US exports of crude oil, petrochemicals, and various energy products have indeed surged significantly. Another key data point worth noting: just last week, the US became a net crude oil exporter for the first time in 83 years, the last occurrence being at the establishment of the Bretton Woods system. But the public mistakenly believes the US has ample crude reserves. On the contrary, the US is continuously selling off strategic petroleum reserves and commercial crude inventories. The US established crude reserves for national strategic security, but now, due to a geopolitical crisis it helped create, it is大肆抛售储备原油 to the global market. The hidden risks are不言而喻. When speaking with large energy companies and refiners, they can clearly sense the crisis隐患. But hedge funds and macro trading firms remain盲目乐观, relaxing merely based on US crude exports of 6 million barrels per day, completely ignoring that in just two months, US domestic refiners will face a shortage of crude feedstock. Industry calculations suggest the safe minimum operating level for crude inventories on the US Gulf Coast is 200 million barrels. Once inventories fall below 220 million barrels, crude supply will become extremely tight. Current inventories are already perilously close to this警戒线. This is why I remain concerned about the market现状. Everyone thinks existing crude inventories are sufficient to balance supply and demand, but inventory data continues to decline. Only when crude inventories彻底触及 the operational minimum will the market猛然惊醒, realizing the world has entered a genuine physical crude shortage crisis. Major banks remain盲目乐观, repeatedly claiming all crises will be resolved in two weeks—a statement that has long become空谈. Setting aside the tangible impacts of the conflict like shipping disruptions and logistics paralysis, no one can even give an accurate answer as to when shipping lanes might specifically reopen. At the start of the year, foreign investment banks were extremely bearish on the crude market. While their stance has warmed slightly, they still refuse to正视 this global energy crisis, merely mechanically adjusting price forecasts following market trends,近乎刻意回避严峻现实—either deliberately hiding risks or根本看不清 the actual scale of this crisis's impact. Some institutions calculate a global crude drawdown of 14 million barrels per day yet only raise their crude price forecast from $65 to $90. When they made this adjustment, spot crude prices happened to be around $90, a purely被动调整 following the market. At that time, front-month crude prices had already risen to the $110-$115 range. The institutions' forecasting logic严重脱节 from actual market conditions. The reason is that many veteran practitioners, relying on past market experience, habitually believe all geopolitical storms eventually subside smoothly and the market always自我调节恢复常态. Previously, many were笃定 Saudi Arabia would quickly ramp up crude production to 12 million barrels per day,彻底化解 the supply crisis. Such optimistic predictions have long落空.
Sen: Past market experience is no longer applicable to the current situation; today's energy crisis is real. Let's return to the stock market. Recently, a market narrative has been circulating: first, as GDP develops, the overall economy's dependence on energy and crude oil continues to decline, so energy volatility in the Middle East is irrelevant. Second, major tech firms' capital expenditure will surge to $1 trillion next year, occupying a huge portion of GDP,足以抵消 energy market volatility—this is seen as the core logic for持续走高 stocks. I'd like to hear your views on these two arguments.
Currie: First, let me share a startling fact I learned this morning: nearly 60% of the profits of a leading AI company do not come from its main business but from asset appreciation in its equity investments and controlled entities. The stock market rallying on such inflated profit data本身就存在极大泡沫隐患. Once the trend reverses, risks will集中爆发. Returning to the issue of crude oil dependence and economic development: from a data perspective, it's true that economic dependence on crude has declined. But commodity price levels and market supply volume are two completely different concepts. Once a core energy commodity like crude oil faces a supply断档, the resulting连锁冲击 is immeasurable. I previously wrote an article comparing crude oil to rare earths in the energy sector. When core energy is continuously drained from the market, all industries suffer. Even a major airline like British Airways claiming to be unaffected by the energy situation is a片面说辞. Core energy may seem to have a微弱 impact on macro GDP figures, but energy shortages directly lead to停产断供 of essential products for民生 and industry like chips and fertilizers. The crisis in downstream derivative industries is far more致命 than volatility in energy本身. And the crisis from a distillate shortage could全面爆发 at any time. Currently, distillate stocks have fallen from 120 to 102. We are entering the peak season for logistics, transport, and travel fuel demand. Prices and inventories will fall further rapidly. Having studied energy supply-demand balances for years, 100 is a key临界值 for distillate prices and inventory. Approaching this point means the crisis is迫在眉睫. Extending from middle distillates to chemicals like sulfuric acid, the production and operation of almost all commodities rely on基础能源与柴油支撑. Once diesel supply becomes紧缺, the entire commodities market will陷入停滞.
Sen: Let's discuss the narrative about trillion-dollar tech capital expenditure. These companies are aggressively investing in AI computing power, acting as if AI compute is无限供给, while刻意忽略了 the most critical production factor for the compute industry—oil, electricity, diesel, natural gas, and various other forms of energy.
Currie: Everyone is疯狂加码布局 the compute赛道,默认算力成本 can趋近于零 and the compute industry规模会无限扩张, yet从未正视 the high energy costs behind compute. Many practitioners don't even realize the compute industry itself is an极度消耗能源的实体产业, and its core hardware高度依赖能源与工业产业链支撑. Even setting aside crude oil, persistently high natural gas prices同样会卡死 tech companies' capacity expansion节奏. Without sufficient, cheap energy supply, all tech industry development plans are只是纸上谈兵. Now, a少数人看清危机本质, but the vast majority of market participants remain沉浸在股市屡创新高的乐观氛围中. When we analyze risks rationally, we get labeled as "大宗商品从业者过度夸大危机." But the现实摆在眼前: currently, global crude oil flows are锐减 by 9 million barrels per day, crude production capacity is缩减 by 12 million barrels per day, and refined product capacity is再缩减 by 5 million barrels per day. Add in受阻 supplies of chemicals, natural gas, and other energy materials, and the市场盲目乐观的心态 is the biggest隐患 in today's financial markets. Assuming shipping lanes顺利重启 in the future, the market will inevitably掀起大规模原油储备补库热潮, and配套能源基础设施 will also迎来大规模扩建浪潮. Regarding the most不合理定价 in the current oil market, it's远期原油合约. The crude front-to-back month spread structure is尚且合理, but远期原油价格 remains定格在 $70-$77 lows,严重低估了后续的供应危机 and will必然迎来价值重估. This is also why traditional energy companies like ExxonMobil and Shell have seen their stock prices持续走低. The previous market rally in old-economy asset valuation修复行情早早落幕, with资金再度回流热门科技赛道. My own investment布局 is十分明确: For equities, sell call options and buy put options. For asset allocation, heavily overweight traditional energy companies like ExxonMobil, Shell, and BP,同时布局 various mining and other old-economy assets,全面押注 old-economy sector valuation修复行情. I am几乎笃定 the mainstream market's investment logic is全盘出错.反复梳理逻辑也找不到自身布局的漏洞. Many investment theses in the tech赛道根本无法自圆其说, pushing up stock prices仅凭概念炒作 with no actual业绩与产业逻辑支撑. The only thing I need to考量 is ensuring sufficient liquidity for my capital before the行情拐点到来. The股市上行空间 is already极度有限,很难再突破现有高位区间. Even if shipping lanes顺利重启, the market will猛然发现 that the actual production cost for crude has早已突破 $100,远超当前市场定价. I一直坚信 the global macro market is即将迎来全面价值重估. All commodities本质上都依托基础能源开采加工而成. Soaring diesel prices势必会带动全品类大宗商品生产成本集体走高. Reflecting on my own investment journey, I've走过不少弯路. With thirty years in the industry, I should have直接布局实物原油标的 like WTI crude initially, instead of过早入手能源企业股票. This experience彻底理清了我的思路: In the early stages of a行情,优先布局近月原油实物合约.等到远期原油价格完成合理重估之后,再进场布局能源企业股票. The投资顺序至关重要. Under this energy crisis, front-month crude contracts行情势必迎来大幅冲高. While the crude期货现货溢价 structure已然形成 and pricing不算完全偏离市场, the低估现状 of远期原油合约依旧存在巨大套利空间. Energy giants like ExxonMobil and Shell后续必然迎来估值修复. Once the energy sector迎来成本通胀上涨行情, market资金就会开启赛道轮换模式. Currently, the energy sector's weight in the S&P 500 has fallen from接近 4% previously back to around 2%. The market依旧无视能源危机带来的潜在冲击. 倘若能源板块权重逐步攀升至指数 5%, the market will被迫正视危机,抛售热门科技赛道资产 like Nvidia,被动调仓布局低估能源资产. The调仓行为 of passive funds还会进一步放大行情波动. The当下市场普遍低估原油上涨空间. Crude prices are远未触及顶部区间, and energy companies will随之完成估值重塑.绝大多数机构投资者 currently低配能源资产.后续在科技资产持续亏损的压力下, they can only被动调整持仓结构. The real高潮阶段 of this行情 will be when远期原油合约启动上涨. From a长远角度,航运通道重启反而会让全球各国清晰意识到能源航运命脉的重要性. Countries will主动加大原油战略储备力度. Gulf Cooperation Council countries will also加速布局多元化能源运输路线与大型储油设施.相关产业投资规模会十分庞大.
Sen: Given our discussion, perhaps you could share the three investment布局 directions you currently favor most.
Currie: First, I remain坚定看好 Brent crude and WTI crude,优先布局滚动换仓近月原油合约. From technical chart movements, it's清晰看出 that whenever Trump releases缓和言论, oil prices短暂回落 before迅速反弹.坚持滚动持有近月合约的交易策略几乎不受短期行情波动影响. The收益空间 from合约换仓 is十分可观, and this is my most核心的原油交易策略. 即便后续局势出现变数, relying on合约滚动换仓的收益也能对冲行情波动风险. Current quantitative trading data也能明显看出 that大量跟风资金 are leveraging the现货溢价 structure,跟风布局近月原油合约并长期滚动持有. Second,布局全品类大宗商品指数,坚守旧经济资产估值修复主线. I currently serve as a senior advisor at a large asset management firm and will后续重新深耕流动性大宗商品投资产品领域,搭建面向普通投资者的大宗商品组合投资产品 covering农产品,棉花, and全品类大宗商品,省去投资者逐一挑选标的的麻烦. The various old大宗商品指数 we used in the past早已落伍. Now, I更看好两款新生代大宗商品投资产品. Their developers are资深业内人士 from Goldman Sachs who深谙传统指数的各类投资弊端. Their long-term超额收益表现十分亮眼. The final布局 is黄金. At this stage, I坚持做空黄金. My previous做空黄金的策略 has already收获不错成效. Once the global geopolitical situation彻底恶化, the market will纷纷抛售黄金换取现金流应对危机. Only when global central banks彻底结束鹰派加息政策 and转向宽松鸽派货币政策之时 will be the最佳时机 to全力重仓布局黄金.届时黄金价格会迎来史诗级大涨. The current全球去美元化进程 is全面加速, and it's也很难改变既定格局. The Bretton Woods monetary system established post-WWII早已摇摇欲坠. The core logic of this system is that the US保障全球海上航运安全 in exchange for美元全球结算主导权. With原油 as a global core commodity, after its核心航运要道被封锁, the US has早已失去维系这套体系的核心底气. Countries自然不再盲目信任美元体系. Looking to the future, both the geopolitical格局 and the global economic秩序 will迎来重构. The US lacks充足财力维持原有全球格局. Future global trade或许会重回多元化结算模式,依托黄金,白银数字化通证完成交易,如同昔日东印度公司的贸易模式一般, relying on实体武装与科技装备保障贸易航线安全.这类潜在风险已然逐步显现. The Middle East, Asia, and全球各地 are悄然迎来格局巨变. To summarize my core布局: Long-term布局原油,坚守旧经济资产修复行情,现阶段做空黄金. For equities,暂时不全面做空, adopting a对冲思路 of selling call options + buying put options.除此之外, the most稳妥的交易方式 currently is布局波动率指数产品对冲全市场风险.
Sen: Thank you very much, Jeff, for the深度分享. This exchange provided numerous极具实操价值的交易思路,收获颇丰. Looking forward to后续再次交流.
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