RE:RE:Writings on the wall for oilI have been watching the European open and oddly enough about 50% of their discusions are regarding oil . The tight supply , low inventories not seen in 30 years and reduced capacity due to government policy were all covered , one host said "its quite a pickle we have put ourselves in" . But there was one guest who when asked about the drop in price blamed it on demand destruction by quoting the EIA oil inventory build . Now correct me if I'm wrong but last week the EIA reported a -4.5M barrel draw which was promptly swept under the carpet , so why is a smaller build this week so newsworthy ?
It is no secret that bank algos are directly attacking the price of WTI and the entire energy sector . We also know that the EIA figures directly oppose industry figures regarding gasoline demand and that there is a worldwide shortage of diesel . Yet the algos keep driving the price down so it brings an interesting question to mind , at what price does the "marginal" driver decide to take that weekend trip to the beach ? Lower prices will only ramp up demand with supply already stretched to capacity . Employment is strong in Canada , the US , the UK and Europe and people are driving , check any traffic cam or major roadway . China is on the ropes and needs to get their economy running again , covid-zero is a financial chaos grenade . Look for that famous Chinese government accounting to clear the covid book soon , even if it means locking people away that test positive .
Biden was given a Ferrari (economy) when he took office , the first thing he did was pull off one spark plug wire (cancelled KeysoneXL) , filled it with regular , not premium (appointed J Granholm Energy secretary) and then whine that Ferrari (Trump) sold him a lemon . Biden has been at war with domestic O&G since he was campaigning and now he is literally "the dog who caught the car" (now what do I do ?) . This short sighted policy is without question the #1 contributing factor to inflation and the new solution to inflation is to kill the economy (just a little bit) when he could fix everything while keeping the economy humming with the stroke of a pen . But Biden won't .
Biden aimlessly wanders the world begging for oil when its all right here in his own backyard . Give some assurance of consistant policy , streamline permiting and use Presidental powers to fast track some pipelines . Refinery capacity needs to increase but that is unlikely to happen . The world needs oil , ignoring the problem will only add fuel to the fire , cheap energy (not shortages) feeds an economy .
There was a time when curious journalists would be asking questions and looking into the discrepancy but those days are gone . Todays media is more propaganda than fact based news and the propaganda says we are awash in oil . Like the appearance of water on hot asphalt from a distance , that mirage will disappear the closer you get . So short term , let the algos drive prices down to $65/b as that will only inflame the glaring supply shortage with increasing demand .
So in closing it would seem the only cure for stupidity is to let Forrest (stupid is as stupid does) cut off the branch he is sitting on . Put a commodity in short supply on sale and drain the little inventory you have left , what could go wrong ? At sometime in the next few weeks this stupidity will present everyone with a screaming deal , some dry powder and the balls to pull the trigger will pay before the snow flies . Stay patient and let the algos do the work .