One week ago, the market was disappointed when Goldman's head commodity strategist, Jeffrey Currie pointed out the obvious, namely that the higher the price of oil rises, the greater the probability it will tumble shortly, as a result of recently shut off production going back online. To wit:

Last year commodity prices were driven lower by deflation, divergence and deleveraging which were reinforcing through a negative feedback loop. Deflationary pressures from excess commodity supply reinforced divergence in US growth and a stronger US dollar which in turn exacerbated EM funding costs and the need for EMs to de-lever though lower investment and hence commodity demand. While we believe that these dynamics likely ran their course last year resulting in signs of rebalancing, the force of their reversal has created a new trend in market positioning that could run further. However, the longer they run, the more destabilizing they become to the nascent rebalancing they are trying to price.

This follows our extended discussion of record storage not only in Cushing but PADD2 in general, as well as PADD3 and now, PADD1: it is now only a matter of time before US storage is "operationally full" and no more oil can be accepted for storage leading to a dramatic plunge in its price.

Then over the weekend, we showed why according to Credit Suisse, among the many skeptics of this furious oil short squeeze rally, the most notable sellers into strength were the entities that know the oil market better than anyone: producers themselves, who are rapidly selling the long-end to hedge prices around $40/barrel.

Since January, the spread between spot Brent prices and 2020 Brent prices has dropped nearly $8.00 to $10.71 per barrel, indicating selling in 2017, 2018, and 2019 futures contracts. According to Reuters, the majority of selling has come from E&Ps looking to lock in prices to hedge against a repeat of last year's second half commodity price-route. At the same time, the hedges indicate a lack of confidence that the current commodity rally will continue.

And now, here is Morgan Stanley's Adam Longson with an overnight note which puts all this together, in which he essentially repeats what Goldman and Credit Suisse have said by saying that "Higher Prices and Rampant Hedging Can Extend the Cycle." To wit:

2Q15 rally all over again? The 47% rally in WTI over the last month started with short covering on OPEC/Non-OPEC headlines. However, the carry through has mostly been driven by macro/CTA funds following better macro data points, a weaker USD, trend reversal and buying on hopes of recovery. Most of these factors are technical and appear temporary. But such false rallies can actually be harmful for the recovery.