Report: Trump Snookered Saudi Arabia into Destroying Crude Prices

This is what you call “3-D intergalactic speed tennis chess.”

Via CNBC:

“They got sort of tricked here,” said John Kilduff, founding partner at energy hedge fund Again Capital. “The Russians and the Saudis in particular ramped up production, ramped up exports ahead of what was supposed to be severe sanctions on Iran, and when the administration gave the eight waivers to Iran’s largest buyers, it undercut that whole equation.”

“So now we’ve tripped into an oversupply situation almost overnight because of the severe reaction by Russia and the Saudis to cover for Iran losses, which never materialized.”

To be sure, the sanctions have shrunk Iran’s exports by about 1 million barrels per day. Few thought the Trump administration would actually achieve its stated goal of cutting its rival’s shipments to zero.

But the sanctions, backed by the administration’s hawkish rhetoric, cut Iran’s exports more quickly than many anticipated. The market also expected another big drop after the Nov. 4 deadline passed. That fear fueled a rally that sent oil prices to four-year highs.

Over the last six weeks, that rally has unwound in spectacular fashion, with oil prices tumbling into a bear market. The pullback has several causes, including a weaker demand outlook for oil and a wider market sell-off, but analysts say OPEC’s output hike earlier this year and the sanctions waivers play a major part in the oil price plunge.

“In early October there was this expectation that a lot of Iran’s barrels were going to come off the market, and so essentially Saudi Arabia was duped into increasing production,” said Matt Smith, head of commodities research at tanker-tracking firm ClipperData.

Smith says it’s uncertain the situation has unfolded exactly as the Trump administration intended, but it has ultimately worked out in the president’s favor — though potentially at a cost to U.S.-Saudi relations.

“They’ve really done a good job of decreasing that oil price, but it has been at the expense of some of those relations there, because surely the Saudis have got to be pretty unhappy with the way things have played out here.”

Saudi Energy Minister Khalid al Falih acknowledged this week that Iran’s exports didn’t fall as much as expected.

He also announced that Saudi Arabia will ship 500,000 fewer bpd in December and said OPEC and its allies may cut production by 1 million bpd next year. That decision could come in a few weeks when OPEC, Russia and other producers meet to review their current policy of easing output curbs that have been in place since last year.

Trump took to Twitter a few hours later, tweeting, “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!”

The president has previously used Twitter to blame OPEC for high oil prices and demand the group take action to cut costs. At the UN General Assembly this year, he told world leaders that OPEC is ripping them off.

Analysts say Falih’s comments this week might have pushed oil prices higher, if not for Trump’s tweet.

“I think the market is ignoring [the Saudis] because of Trump,” said Helima Croft, global head of commodity strategy at RBC Capital Markets. “I think if you didn’t have the Trump tweet, there would not be this skepticism. Right now, there’s a view that the Saudis will reverse course because of Trump. There’s a sense that Trump really has them over a barrel at this point.”

The kingdom is in a precarious position after a Saudi prosecutor acknowledged that government agents killed journalist and U.S. resident Jamal Khashoggi in a Turkish consulate last month, following earlier denials by the state.

Gary Ross, CEO at Black Gold Investors, believes the cartel will ultimately agree to cut output when it meets with Russia and other producers next month. However, in his view it may be too little too late.

“They’re pretty much snookered by Trump,” Ross said. “I mean, Trump led them to believe that the Iranian exports would be zero. It turned out they’re going to be 1.2 to 1.5 million barrels a day, way higher than people thought.”

“Broadly speaking, it’s an oversupply story, and I think they will cut back, but they’re not likely to cut back enough to drive prices back up to anything like $80 Brent,” he told CNBC. “I think we’re going to be in a $60 to $70 Brent market for some time.”

The White House did not immediately return a request for comment.

What a time to be alive.

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I’m not a big fan of this melodrama at all. The BREXIT people have been wanting to BREXIT for two years already and still — NO DEAL. The main minister for this nonsense resigned today and now there are fears that a deal might not happen, or worse — a hard fucking BREXIT happens and crushes the banks.

“The absolutely scary thing happening today is that a deal that could get done might not get done, and he could get in,” said Alasdair Haynes, the chairman of Aquis Exchange, a London-based equities trading firm. “If we have a hard Brexit and Corbyn, that’s Armageddon.”

Sterling is down sharply, as well as the banks.

Our futures were sharply higher about an hour ago — but now they’re milquetoast and looks like they want to swan dive into a pool of hardened cement.

RBS is off by more than 8%.

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San Antonio is enduring the coldest Autumn in 102 years. A severe cold front is coming, and it’s going to break your fucking balls off. Meanwhile, we’re fracking fast like motherfuckers, liquifying the gas, and shipping it overseas for extreme profit.

You didn’t think I could resist the temptation to talk about the UGAZ/DGAZ dilemma — did you?

Fucking

Scam

These Velocity motherfuckers should be drawn and quartered. How many people just got wiped out in DGAZ? This is a trade that was supposed to be easy — because natty never goes higher. We get a 6 standard deviation move in UNG and everyone loses their god damned minds. Fucking UGAZ is the new TLRY and DGAZ is in the graveyard, visiting XIV.

Levered ETFs are evil, especially when a squeeze is on.

I haven’t taken the time to read the prospectus for DGAZ — but something tells me those clowns are about to get vehicle’d and wiped from the earth.

Headline news to come — a bastard cold front is coming to break your fucking water pipes in half, causing severe damage to your piece of shit homes.

Look at that cold front, boy.

Odds are, natty trades to $7, maybe even higher. There is nothing stopping it now and the shorts are panicked, about to get their jawbones crushed by coked up gorillas. I’ll be avoiding this trade, at least on overnight positions. I might take a stab at it intra-day, if only to entertain myself.

My highest confidence trade right now is gold. There’s too much fear and too much trepidation for this not to work.

Long $NUGT.

PROSPECTUS UPDATE:

DGAZ, like DIV, has a trigger for an acceleration event pic.twitter.com/Wdq9dTHlsA

— Steve Place (@stevenplace) November 15, 2018

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Gold has taken off. Panic mode gripping Wall Street. I bought NUGT.

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It was a nice rally. I was in line at Whole Foods judging people in front of me very harshly. I peered into their little wagons and reverse engineered what they were having for supper — very disgusting and chaotic, believe me.

I’m back the turret now, having missed out on that spring. But truthfully, it’s best I wasn’t around to bear its witness. Too much churning at House Fly. This isn’t what I do best. I specialize in building systems, structures, portfolios, and momentum trading. When markets swing to and fro without rhythm, I get dis-jarred. When I get dis-jarred, I fucking lose lots of money.

I’ve made my bed, see? I’m in retail and some tech, and SOXL, 20% cash, trying to believe in the way of the future. There’s lots to take in, cross-currents to ingest. The short squeeze in natty is mind blowing and I feel it can trade to $7 soon — but I won’t take a position. If I had some healthy gains to speak of, perhaps. But it’s not for me.

The crypto markets have been bludgeoned to death, down in the deep double digits today. Total market cap is now $182b, down from $800b. You do the math.

I see markets are sliding again, hurting those who bought the rally. This is an evil tape, as foreboding as it is malevolent. I’ve been doing this forever, so I can get away with SOXL positions and only 20% cash reserves. In the money management world, 20% cash is like saying 100%. Those fuckhead advisors, leeching off their clients for basis points, do nothing other than fully invest them in low cost ETFs. Should that matrix get disrupted by an elongated decline, prepare to see disruption and liquidations, ad hoc.

Again, I’m letting my dreams get in the way of rational thinking here. Charts are bad. Things are broken. Stay in cash and wait for a better tape.

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Crash mode sequence initiated. This is the part when everyone gets sold on the idea that we really are gonna crash — because the new, oh, it’s so damned bad.

20% cash, lamenting a little for buying retail earlier today. Mistakes will be made, and often, in tapes like this.

Maxine Waters is going to be in charge of bank oversight. She’s a damned idiot. Trump’s trade war. Slowing growth in EM. Dollar. Crashing oil. Parabolic natural gas. Bitcoin is dead.

This is 2018.

Pray for warmer climes.

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I have to be honest with you. I’m exhausted trading these fucking cloud stocks, chasing them into the sewer pipes, getting bit by rats, soiling myself for a few random pieces of silver. I want to live fat off the land, like Jeff Macke. That’s a person to look up to, simply living the American dream off the Pacific coast, getting heavy off tacos and hammed burgers, making coin, uninterrupted, in Santa Claus inspired plays.

An ordinary day for Jeff is moseying down to the local Target, which his father literally created, and see how things are placed — all nice and clean American living.

I want to be like Jeff. Ergo, effective immediately, I AM JEFF.

I sold out of this fucking bullshit LABU. It gave me nightmares and I hated it. I lost 12% in the damned thing. I also sold out of DOCU, another bowser.

With my cash reserves, which were 50% before I trans-morphed into Jeff, I bought CROX, OLLI, ROST, CVS, ZBRA, and DECK. Now my cash is 20% and I feel really good and my spirits are up and I’m rooting for consumers to spend their money.

To celebrate, I am heading over to WMT to look at their Xmas decorations.

DEVELOPING…

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Be them.

Force harsh restrictions on vendors of heating oil. Brainwash Americans into believing natural gas is safe, in spite of it blowing up people’s homes and the exploration for it is toxic AF.

People love natural gas because coal is evil. Shit it dirt cheap and America is the Saudi Arabia of natural gas.

Big oil panics and shits their pantaloons.

Prices spike after Hurricane Katrina. Natural gas providers like CHK are the new shit. Exxon sucks.

Price collapses, natty gets clown punched lower for the next decade. CEO and founder of CHK crashes himself into a fucking brick wall and dies. NOT A SUICIDE!

Meanwhile, Exxon sops up natural gas properties like a motherfucker. They buy XTO for $41 billion.

Over in Europe, gas prices are expensive as shit and they get most of their supply from evil Russia.

Formulate a god damned plan.

Over in the US, people are formulating, figuring out ways to liquify our over-abundance of gas, in order to export it overseas. The very thing that keeps our prices low will be eliminated by this one invention.

We did it.

Cheniere makes first LNG shipment in 2016.

Build more homes. Put those fucking natural gas pipes in. Heating oil the fuck out.

Over in Europe, more hand wringing. Russia is so evil, we shouldn’t buy gas from them anymore. Problem is, we’ll all freeze to death.

Formulate a plan. We can get that fucking natural gas from Qatar — problem is Syria is in the god damned way.

Ah ha! DESTROY IT, take it over, and then build pipeline.

Plan fails. Gosh darn it.

LNG shipments from US really picking up steam. Every speculator in energy markets are short natural gas. Kill them via squeeze. Remove supply via LNG and bury them.

Ongoing.

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What a bad trade. I had purchased TLRY the other day at $112 and it went to $140 the very same day. I didn’t sit there — I presided. Me and my big long face, presiding — gazing down on everyone, smugly, and chiefly. I walked with purpose and punched those in the mouth that had it coming. I was part of a drug cartel, an investor mind you, and I was seeking to destroy others who bet against me.

Yesterday earnings came out and they sold a lot of kilos, but it wasn’t enough. I just sold the stock for a 9.5% loss. Now I’m downtrodden and reminiscent of the days when I knew it all, the man with the long face kicking dirt at everyone else.

Markets are up, but they’re weak. I’m ~45% cash and feel like I need more. I feel like my stocks aren’t enough and that I either need to change them or add more. This is the type of thinking that gets people in trouble. The constant desire to do something is flawed thinking. Sometimes it is what it is — a bad day. Sometimes you should just eat a sandwich.

The good news my quant portfolio is +70bps.That’s where I keep most of my money. The bad news, I own DOCU, LABU, TMF, OKTA, and MOS — which are all down. My only saving grace, god damn it, is SOXL and even that is being a poor sport. This might be one of those days when everyone else is jumping rope in the sun, dressed clean and well, while I’m on the fence with my ripped jeans and mud stained shirt hating on everyone else for being beautiful and happy.

Long faced man signing out for now.

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There are zero reasons to buy. Looking at WTI -8% and all of the news, I am shaken to my core — literally shaken. However, I have large balls and truly do not care about losing all of my money. If I was poor and destitute, I’d still be miserable, so what’s the difference?

I bought some ROKU now — because the MUH chart and because I want some exposure to beaten down tech. All of these charts look the same. The mean reversion trade has died. I should know, being the owner of a system that has mean reversion tools. HOWEVER, we’re smart people, very wise, and filled with innovation. There is a hunger in us to create ways and systems to profit from this action. I will see to it that I win, one way or another. For now, the dollar is a hugely important to the sentiment of the market. This is why I’m still long TMF.

Hopium is a strong drug, an aphrodisiac even. Let’s see how we close and god willing tomorrow will bring greater fortunes. We are watching NVDA very closely and I’ll be monitoring the parade of data coming out of China soon. EM is important, but the stability in FX and commodity markets might be the tail that is wagging the dog.

Nevertheless, barreling into Turkey Day, I remain stoically optimistic for a bounce.

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