I confess myself impressed by the rebound from this morning. I figured we’d grind lower and correct later this week what with the day the Euro markets had yesterday. So goes the world, I guess.
However, here in the 9th floor, my men have been given marching orders to never falter or steer off the path of Dollar St. They quick step vigilantly onward, ignoring the attractive flora and exotic women on their way to swift victory.
So my forces march from my tower. The last shall carry me in a war tent, so that I can arrive on the field and watch first hand as those who go long oil without reservation succumb to trepidation and get run through.
I use their corpses to make lamp oil…I find it burns cleanest.
After much wavering, I’ve decided to hold off on covering UCO, the brunt of my hedging. The uncomfortable truth, for those of you like Goldman Sachs who have stored up vast reserves of petroleum and derived contracts, is that there is no shortage of oil in the world right now. We’re doing just fine.
And we find we need less of the coveted “black gold” with every survey of developing affairs. I cannot believe oil markets are truly pricing in zero growth right now, at more than $80 per barrel. There are a lot of oil producing nations who have hungry mouths to feed each and every day, after all.
And the danger of a massive shock coming out of Europe or even, yes, Asia, is a very real possibility. Don’t think I’ve forgotten the far East during our fixation on the old West. We just need one poorly planned misstep and much of the global economy could grind to a halt.
However, between the two, I am more worried about our relationship with old mother Europe. I find Europeans to be contemptible, in most of their comings and goings, and as a body they are fractious, argumentative, arrogant, and worst of all, ineffective.
The business dealings between us and China are very rigorously controlled. The Chinese know better than to dick with the status quo, so even though at first glance it isn’t a sustainable relationship, with proper upkeep and if uncomfortable questions are avoided, there really is a slim possibility it can continue almost indefinitely.
But with Europe… well, Europe has produced way too many people in our lifetimes who love to take pointless stands on bad principles. You have all sorts of labor organizations who could scuttle a solution “because”. You have hatreds stretching for millennium between people who’ve invaded each other’s home lands almost for sport, as much as for pillage.
It definitely worries me that the next move rests on the side of the board that loves not making decisions.
Bernanke cannot intervene in our markets. Europe needs intervention. But Bernanke cannot do it without permission or cooperation. He may get neither.
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Market should be up tomorrow, along with oil…assuming that turns out to be true, i will go short oil via one of these doubles. Should be a fantastic hedge if something horrible happens, and how much upside can there really be in the current environment?
At a very high level analysis, crude + products inventories are 4% below last year’s levels in the US. 2010 levels were ~928 mln barrels, current levels are 888 mln bbl.
This is interesting since one needs to account for the 60 mln barrel SPR release over the last 2 months. Brent prices are a whole ‘nuther ballgame.
I don’t think the SPR move is that meaningful, the quality is worse. But on the other side of the game, look at the consumer and the state of manufacturing.
That’s why I think our oil needs are getting met in full.
I was only considering the SPR move from a volume / inventory perspective. Take out that 60 mln and the current inventories are that much lower from one year ago.
Yes. For what it’s worth, I think your assessment of the state of affairs within the oil industry is beyond spot on. (Do you still work for a servicing company?)
It’s the demand side of the coin that I think we’ve disagreed on.