Before the Great Financial Crisis Mortgage Backed Securities (MBS) were trading as if the underlying loans were sound. The ratings agencies (Moody's, S&P) had blessed them with investment-grade ratings, and institutional demand was so voracious that spreads were compressed to levels that made no economic sense given the actual loan quality underneath.

Dr. Michael Burry famously shorted them via Credit Default Swaps. Because the market believed these bonds were safe, the CDS premiums Burry paid to insure against default were cheap. He was essentially buying fire insurance on a house that was already smoldering, at rates priced as if there was no fire risk. His downside was capped at the annual premium. His upside was the full notional value of the bonds going to zero.

Just like the MBS buyers were relying on ratings rather than reading the actual loan tapes, oil futures buyers are relying on diplomatic convention and historical mean reversion rather than stress-testing the actual physical infrastructure vulnerabilities. The complexity of global oil routing is the equivalent of the CDO prospectus nobody read.

Be very careful hanging your hat on the positioning of Wall Street traders