RE:IEA: Russian oil production could fall by 3MM Bbl/d in 2H'22Agreed.
There is an interesting change in corrolation presently whereby OBE's share price (and most of the sector) has recently been more corrolated to the Dow index than the price of oil.
When markets crash, all corrolations tend towards 1.
In laymans terms, that is called tossing the baby out with the bathwater.
Investors may have good reason to sell high PE companies like Tesla etc. However in a high corrolation event, everything gets sold, including companies which should not be sold.
This is why fortunes are made in bear markets.
Its pretty easy to see that oil demand will increase when China removes its lock downs. As unnecessary as those lock-downs maybe, they do work. Shanghai is almost down to zero community covid cases once again. Their policy is to open once they have 3 days of zero covid in the Shanghai community (most of the cases they are reporting are inside quaranteen facilities - ie not in the community). Today they reported 2 community cases in Shanghai after having 2 days of zero community cases. That suggests the clock restarts - at least in the area where the cases were found. It also suggests they are very close to having zero covid cases at large in Shanghai (those two cases may have been false positivies).
It is also pretty obvious that China will be working on an omicron based vaccine presently, which is probably being grown out as I write this. Once they have that vaccine, they will be able to apply it quickly. They may already be doing it in Shanghai (perfect place to test it).
It is also pretty obvious that the conflict in Ukraine will be a lenghty stalemate - with Russia occupying eastern sections of Ukraine and Europe responding with oil sanctions. From what I can gather, these western sanctions are having minimal impact on regular Russian's - the price of sugar is about twice what it was, resulting in some inflation. However this inflation is similar to that experienced presently in Canada and the US - somethng to grumble about, but not much more. ie, the oil sanctions on Russia (either direct, or indirect by not insuring tankers entering Russian waters etc), will reduce supply by some amount - maybe a million or two barrels per day. That is all it takes to support oil prices.
The Bank of Canada made a speech today in which they blamed higher prices on lack of foreign investment. That lack of foreign investment is because the Canadian Governement has made it very difficult, and undesirable for foreign capital to want to invest in Canada. That won't change until at least the next Canadian election, which is 2025 given the Trudeau Singh deal.
Two days ago the Saudi's stated that the reason for high oil prices was the lack of investment in oil development (which in laymans terms means to much investment in renewable energy and not enough in oil). This is what common sense says when you are not trying to get votes from a population that has been brain washed into thinking the globe is warming because of carbon emissions. Even if that changed today, it would take years to correct.
These are just a few examples of why the world is changing from maintain demand/supply balance by increasing supply to reducing demand.
The reduction in demand is done by demand destruction.
Demand destruction is achieved by increasing the price.
This brings us to one of those simply demand/supply graphs economics students see in their first week of economics classes. There is no way around it.
That is the paradym shift which is occuring right now. Demand/supply balance is changing from being achieved by changing supply to changing demand.
It looks like that is the future from now on - certainly for the next few years, but maybe even for ever.
In that context, oil producers, who are the beneficiaries of this paradym shift, are having their shares sold off along with companies that are over priced, and should be sold.
The corrolation towards 1 for all companies is a short term thing. Its an indication of panic over reason.
Panic leads to great deals - but it doesn't last.
Apple now has a PE of about 23. Microsoft's PE is about 26. Netflix PE is about 15. They are no longer 60-80 PE companies. PE's in the 20's for high tech companies such as those are not over valued.
This suggests much of the decline in Tech shares is over. It was the Tech shares that crashed the US market. This suggesets the Dow (or S and P) may be getting to a floor.
If the Dow or S&P are near their floor then the panic will abate, and the corrolation between market sectors will return to normal.