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Oil Looking Bullish, President Biden, PM Boris Johnson, and EU Looking Foolish

The technicals, fundamentals, and politics make for an interesting oil and energy setup.
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WTIC chart courtesy of StockCharts.Com annotations by Mish

WTIC chart courtesy of StockCharts.Com annotations by Mish

Technically speaking, an ascending triangle is a bullish pattern. The same pattern exists on the North Sea oil Brent Crude contract.

Brent Crude 

Brent chart courtesy of StockCharts.Com annotations by Mish

Brent chart courtesy of StockCharts.Com annotations by Mish

Both patterns are the same technically. 

It's interesting to see WTIC at near parity with BRENT. Typically BRENT is higher. Now it's 115.07 for WTIC and 115.60. 

Brent to WTIC Ratio 

BRENT to WTIC ratio courtesy of StockCharts.Com annotations by Mish 

BRENT to WTIC ratio courtesy of StockCharts.Com annotations by Mish 

Bullish and Bearish Cases 

Bearish: The Fed is hiking, the ECB is poised to hike, liquidity is drying up, the entire world is on the verge of recession

Bullish: The war in Ukraine and totally inept responses and sanctions by governments,

Central Banks vs Politicians

Actions by central banks are bearish for oil but actions by governments are bullish.

Let's discuss the politics.

U.K. Introduces Temporary 'Windfall Tax' of 25% on Oil and Gas Profits

If you want less supply and higher prices increase taxes. That is what progressives in the US demand, and what UK Prime Minister Boris Johnson did.

Please note U.K. Introduces Temporary 'Windfall Tax' of 25% on Oil and Gas Profits

The British government unveiled a 15 billion-pound emergency aid package on Thursday featuring a 25 per cent tax on profits at oil and gas firms, to help offset increases in the cost of living.

Treasury chief Rishi Sunak said the government would introduce the temporary windfall tax which is expected to raise 5 billion pounds (more than $8 billion Canadian) over the next year to help fund cash payments to help millions of people cope with sharply rising energy bills, Sunak said.

Hooray! More free money. Inflationary madness continues, and it will be hard to take back. 

Meanwhile, Bloomberg reports Prime Minister Wants More Investment in Oil, Gas, Renewables

Excuse me for pointing out that you do not get more investment in oil and gas with a 25% tax on profits!

Echoing my comment, British Petroleum responded that it would have to look again at its investment plans in the UK because the chancellor’s new levy is a “multiyear proposal” rather than a “one-off tax.”

Biden Doing Everything Possible to Drive Up the Price of Oil, Some of It's Illegal

On March 22, 2022, I commented Biden Doing Everything Possible to Drive Up the Price of Oil, Some of It's Illegal

Expect Higher Gas Prices

With Biden sanctioning Russian gas, and with energy being mostly inelastic, don't expect too much relief at the pump.

Do expect more energy nonsense from Elizabeth Warren and president Biden.

I believe the scorecard on the above sentences is three of three.

Let's flash forward to today.

New EU Embargo of Russia Proposal 

Also note EU Spares Pipeline Oil From Russian Embargo Plan to Break Logjam

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The European Union proposed banning seaborne oil from Russia while delaying restrictions on imports from a key pipeline in an effort to satisfy Hungarian objections and clinch an agreement on a stalled sanctions package that would target Moscow for its war in Ukraine. 

Member states would phase out their imports of seaborne crude in six months and refined petroleum products in eight months, said the people, who asked not to be identified because the discussions are private.

The proposal would give more time to Hungary, which has opposed the deal, to find a technical solution that satisfies its energy needs. It would also address the concerns of other landlocked countries, including Slovakia and the Czech Republic.

Exempting pipeline oil from the measures -- which Hungary had previously asked as a condition to back the package, along with more time and infrastructure investments -- will dent the impact of the sanctions. Russia shipped about 720,000 barrels a day of crude to European refineries through its main pipeline to the region last year. That compares with seaborne volumes of 1.57 million barrels a day from its Baltic, Black Sea and Arctic ports.

More Sanction Madness 

This is more sanction madness. I do not know if Hungary will go along but Germany to Stop Russian Oil Imports Regardless of EU Sanctions

I will believe that tidbit about Germany when I see it, but no doubt that is the goal. 

Unless Saudi Arabia or other producers pump more oil, the EU's needs have to come from somewhere. 

Supply Chain Madness

Global map from Nations Online Project, annotations by Mish

Global map from Nations Online Project, annotations by Mish

Supply chain disruptions are already madness, as I described previously. 

Meanwhile, please note Greece Emerging as New Hub for Russian Ship-to-Ship Fuel Oil Exports.

The Greek energy ministry declined to comment on what it said was private companies' business.

Also Russian Oil Producers Start Using Tankers the World Didn’t Want

New Oil Route courtesy of Bloomberg

New Oil Route courtesy of Bloomberg

And instead of getting oil from Russia, the EU will use that white line in reverse to get oil from Saudi Arabia!

Synopsis

  • Russia bought cheap tankers and uses ship-to-ship transfers to avoid sanctions
  • Oil travels thousands of miles instead of hundreds of miles. 
  • China, Greece, and India are all willing to buy Russian oil but the longer route bumps up the price.
  • The same applies to the EU over a reverse path.

Added Bonus

Hoot of the Day

This massive inefficacy is something only politicians on three continents could design.  

As a direct result, more money than every is flowing into Russian coffers. And the final kicker is the Russian rubble is now the strongest currency in the world vs the US dollar in 2022.

I believe this qualifies as Hoot of the Day.

Question of the Day

So what will it be, politicians or central bankers? 

Place your bets. By the way, think about the possibility of one now and one later. 

This post originated at MishTalk.Com.

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