Crude is getting crushed early going, off by more than 2%. I never believe what the headlines say when it comes to crude. I like to believe the commodity is used as an economic weapon to hurt others. Recent weakness in the commodity is linked to an upsurge in Libyan production, and of course shalefags on the US drilling like maniacs.
Crude stockpiles remain 100 million strong. The fact of the matter is, crude is in a danger zone now of slipping back into the $30s. If it does that, I think we’ll start to hear about wells getting shut in and smaller companies in danger of failing on their debt covenants.
Here is what Bloomberg is citing as notable in the crude space this morning.
Libya is pumping about 900,000 barrels a day, according to a person with direct knowledge of the matter, who asked not to be identified for lack of authority to speak to the media.
There were 5,946 drilled-but-uncompleted wells in U.S. oilfields at the end of May, the most in at least three years, according to EIA estimates.
Pierre Andurand’s oil hedge fund lost 17.3 percent in the year through May as one of the world’s most prominent energy bulls suffered in the wake of last month’s OPEC meeting, according to a document outlining the fund’s performance.
Bottom line: the sector is down 37% for the year. The notion that inflation is back is dead. We are raising rates in a deflationary environment. It’s only a matter of time before this all catches up to markets — currently in a haze, enjoying the low VIX environment.
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There are always unintended consequences. I wonder what the Yellowstone supervolcano will have to say shortly to all this “shalefags on the US drilling like maniacs”. Markets and oil traders may not like when yellowstone starts talking.
Yellowstone supervolcano is superbullish for WTI.