5 daysJapan Nuclear Regulator Greenlights Radiactive Water Release From Fukushima
6 daysChina To Offload 2 Million Barrels of Iranian Crude Despite Sanctions
6 daysEx-German Chancellor Could Be Sanctioned Over Rosneft Ties
6 daysGasoline Prices Top $6 In California, $9 In Parts Of Europe
6 daysOil, Gas Employment Will Take Five Years To Recover From Covid: Rystad
6 daysInsurers Are Suffering Major Losses Due To Climate Change
6 days"Fossil Fuels Are A Dead End," UN Secretary-General Says
6 daysRussia Increasingly Using Own Oil Tankers To Boost Shipments To Asia
6 daysSaudi Oil Revenue To Surge 66% To $249 Billion On High Prices
6 daysRussia Could Halt Gas Supply To Finland On Friday
6 daysRussia's Gas Flows Via Ukraine Plunged 50% In The Past Week
7 daysAPI Reports Inventory Draws In Crude, Gasoline Despite SPR Release
7 daysLibyan Oil Deadlocked As Clashes Force PM-Designate Out of Tripoli
4 minutes"Natural Gas Trading Picks Up Considerably Amid High Volatility" by Charles Kennedy - ...And is U.S. NatGas Futures dramatically overbought at the $6.35 range?
8 minutesHow Far Have We Really Gotten With Alternative Energy
12 minutes What Russia has reached over three months diplomatic and military pressure on West ?
9 minsGREEN NEW DEAL = BLIZZARD OF LIES
8 hours"Russia will stop 'in a moment' if Ukraine meets terms - Kremlin" by Reuters via Yahoo News...but Reuters suddenly cut out the balanced part of the story.
2 daysWhat China is Learning from Russia's War in Ukraine and its Consequences
10 hoursAdvancing Fundamental Drilling Science - Geothermal drilling successes offer potential gain for petroleum industry
9 hoursNatural Gas is the Cleanest and most Likely Source of Energy to Fuel the World.
4 daysFailure To Implement Russian Oil Ban Could Send Oil Crashing To $65
After around forty years of making a living from financial markets in one way or another, I am not often left scratching my head these days. I may not agree with every move, but I can usually see the logic behind them. This week’s big drop in oil prices, on the other hand, mystifies me. I can, I suppose, see that it was a “buy the rumor, sell the fact” kind of thing, but the timing of the move and its complete disregard of news that positively impacts fundamental factors was a bit puzzling.
After two months that saw crude jump around twenty percent, a pullback was coming at some point, almost no matter what. That is why I wrote here three weeks ago that I was beginning to trim some positions in oil stocks, not because I expected a collapse or anything, but just because it was time to take some profit, knowing that I could buy back in if oil did pull back for technical rather than fundamental reasons.
When that pullback started as the OPEC+ meeting approached, I began to get a bit nervous. Did the market know something I didn’t? Had there been massive behind the scenes pressure from Biden and European leaders who were suffering politically because of rising energy costs? Were we about to see another easing of output restrictions?
The answers were no, no, and no but that didn’t seem to matter.
One gets the feeling that, far from feeling pressure as a result of the discomfort of Biden, Johnson et al, the primary drivers…
After around forty years of making a living from financial markets in one way or another, I am not often left scratching my head these days. I may not agree with every move, but I can usually see the logic behind them. This week’s big drop in oil prices, on the other hand, mystifies me. I can, I suppose, see that it was a “buy the rumor, sell the fact” kind of thing, but the timing of the move and its complete disregard of news that positively impacts fundamental factors was a bit puzzling.
After two months that saw crude jump around twenty percent, a pullback was coming at some point, almost no matter what. That is why I wrote here three weeks ago that I was beginning to trim some positions in oil stocks, not because I expected a collapse or anything, but just because it was time to take some profit, knowing that I could buy back in if oil did pull back for technical rather than fundamental reasons.
When that pullback started as the OPEC+ meeting approached, I began to get a bit nervous. Did the market know something I didn’t? Had there been massive behind the scenes pressure from Biden and European leaders who were suffering politically because of rising energy costs? Were we about to see another easing of output restrictions?
The answers were no, no, and no but that didn’t seem to matter.
One gets the feeling that, far from feeling pressure as a result of the discomfort of Biden, Johnson et al, the primary drivers of OPEC+ decisions, the Saudis and Russians, are enjoying it. They have major powers by the balls and the louder the leaders of those countries squeal, the harder they squeeze. The press release that followed the virtual meeting was couched in language about providing “…stability to oil markets…” but the decision itself read more as a “screw you” than anything.
That really shouldn’t come as a surprise, although I admit I thought that there may be some backdoor dealing that resulted in an offer that OPEC+ couldn’t refuse. Putin and Mohamed bin Salman, the de facto ruler of Saudi Arabia, had much better relationships with Donald Trump than they have with Joe Biden, so anything they can do to put pressure on the current administration is in their long-term interests. There is a danger that as the world moves away from fossil fuels, OPEC+ countries will leave themselves with stranded assets if they don’t take advantage of increased demand and high prices. However, long-term geopolitical concerns seem to be outweighing that right now.
Given that, the real surprise came not in the decision itself, but in the market’s reaction to it.
After the announcement, crude dropped around five bucks.
As I said, that is a classic “buy the rumor, sell the fact” kind of thing given the run up in the morning that preceded the end of the meeting but, in the context of a market where supply remains restricted and demand is increasing, it makes little sense. Over the next couple of months, those basic facts of supply and demand look like remaining in place so, even though the OPEC+ announcement resulted in a drop in crude, I remain bullish, if a little more confused than I was before, at least until the end of the year.
To access this exclusive content...
Select your membership level below
COMMUNITY MEMBERSHIP
(FREE)
Full access to the largest energy community on the web