West Texas Intermediate crude blasted through daily resistance at $83 touching $88 per barrel today. That’s the highest level since November of 2022.
Technically speaking, there was substantial resistance at the $83 level. That level is now support.
There is resistance at the $90 level and stronger turn backs at the $93.50 level. If this rally were to fail, those are the likely spots.
Fundamentally Speaking
Fundamentally, Oil Prices Settle at 10-Month High as Saudi, Russia Extend Supply Cuts
Investors had expected Saudi Arabia and Russia to extend voluntary cuts into October, but the three-month extension was unexpected.
“This is a clear indication that oil prices trump volume (for Saudi Arabia),” said Jorge Leon, senior vice president at Rystad Energy.
“These bullish moves significantly tighten the global oil market and can only result in one thing: higher oil prices worldwide,” Leon added.
Key Points
- Brent futures settle above $90 a barrel for first time since Nov
- WTI crude oil also closes at highest since Nov
- Saudi Arabia, Russia to extend voluntary supply cuts by 3 months
- Goldman Sachs lowers expectations of U.S. recession
Strategic Oil Reserves
Wolf Richter at WolfStreet reports Crude Oil WTI Jumps to Highest since November, as SPR Gets Refilled, Saudi Arabia & Russia Extend Production Cuts
Unless rent prices take a very quick hit, the CPI will soon surge. Good luck with that.
Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
Meanwhile, please note Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
Not even 50 percent federal tax credits were enough to make Biden’s energy policy work.
The Alliance for Clean Energy NY is also requesting an average 64% price increase on 86 solar and wind projects.
What a hoot. See the above link for details.
The USD index is at 104 and approaching all time highs, where the heck is Tony Bennett?
Now at 105!
CBS radio news, this morning. The UN took the world’s temperature “and it’s alarming.” “This may be the hottest year in all humanity.”
I laughed. It’s propaganda, just as “safe and effective” was. Just as with Covid, they are trying to scare people into submitting to a government agenda. They are playing the public.
Now Europe is being “FLOODED”!!!
The level of the Strategic Petroleum Reserve is not as important now as it was in the years before. Back then we had to import half of what we used but now we pump so much oil that we can export it while at the same time take care of all our energy needs. At the origin the Reserve was measured by how many months of current oil consumption it could hold and not by the absolute value. If we use the original measurement stick we can say that since we are now self-sufficient in oil and likely remain so for the foreseeable future that our need for a Strategic Petroleum Reserve of this size is not necessary at all. If I put on a Libertarian hat I would say that not only is the size excessive but that there is no need of it at all anymore and as a cost-saving measure should be eliminated entirely. I am not that radical so I do see a need in case of something truly unforeseen and I am comfortable with the Reserve at this level and see no urgency in refilling it either with cheap or expensive oil.
https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php
The US does not have so much oil we can export it and take care of all our needs. It’s true that lots get exported but plenty get imported too. See the chart at the link above to see production, consumption, imports and exports.
For an incredibly brief moment in time starting during Covid exports = imports. But the US is struggling to maintain that balance and I suspect very shortly it won’t be able to keep up.
The Energy Information Administration (EIA) posted numbers for the year 2022 and showed that we were a net exporter of oil and gas by 162,000 BPD. That’s down from 2021 but still net positive. I am sure that you would agree that compared to what it was a decade before our net energy balance is much better and will probably remain positive in the future. In theory that means we do not have need for a large Strategic Petroleum Reserve. In practice though if something bad happens and our allies are cut off from oil then the SPR would be very useful.
“Careful what you wish for.”
While I might be overdoing things in terms of my enthusiasm for a recession. My basic premise still holds.
Buyers & realtors, et al are clamoring for lower interest rates. All that’s going to do is re-ignite a fire under an already smoldering new construction market. For the foreseeable future, existing home sales, for obvious reasons, are dead. The ONLY way out of this unaffordable housing is for there to be at least a moderate to severe recession. ANYTHING else does NOTHING for housing affordability.
Under what scenario does anyone think that housing can keep going up, even if it’s back to historical means of 3-4% a year? A house in my area went from $150K to $600K in less than 12 years. So there’s enormous BAKED in pricing in housing. The ONLY fix for that is a recession WITHOUT rent & mortgage relief. Low mortgage rates do nothing to eliminate what’s already baked into the system. The Fed’s 13-year suppression of rates (2009 – 2022) has ended, and it’s not going back anywhere near .25%.
And, no, my job is extremely secure. At most, I would have to take a pay cut, which I’m totally fine with. I’ll pitch in.
My college educated kids are 27 (business) & 23 (mathematics) are not going to be able to afford a house anytime soon without a recession. Unfortunately, they very well could loose their jobs in a recession. If they want to own a home, then they’d better be ready to endure a recession. Otherwise, they and all sorts of people are screwed.
The only people who will be able to afford housing over the next 10-15 years are gen X’er’s like myself who inherit money from either the silent generation or the boomers. If you don’t inherit money, there’s a good chance you’re renting for the rest of your life.
High mortgage rates are probably only 25% of the problem. Baked in, unaffordability is the other 75%. It’s that simple.
When the recession arrives, look for Elizabeth Warren to be the first of many Senators screaming at whomever the Fed Chair is to drop the FFR back near zero and for her fellow dems / uniparty to trot out rent & mortgage relief.
Our economy is being run by MMT-based policies.
The answer to too expensive housing costs for individuals to to move to a cheaper location most probably to parts of the country where housing prices are reasonable. My and your ancestors did this so in reality there is nothing to give up and all to the gain. Don’t insist on living in a place where you can’t buy a house. It means that you are underpaid and will remain underpaid no matter what how you rank in the statistics. Making $100K and having to live with roommates to get by means that you are a failure. Get out. There are lots of places that really nice and cheap. Migrate like your ancestors to greener pastures.
“The answer to too expensive housing costs for individuals to to move to a cheaper location most probably to parts of the country where housing prices are reasonable.”
Tell that to all those people who live in existing homes and took out 90% refi’s. They’re locked into their homes indefinitely.
Either way, my original point still stands. Housing is way overpriced, whether or not you’re willing to move to East Bumble F. Again, the only solution is a real recession without rent & mortgage relief.
Mark my words, when that day comes, Congress will do everything they can to throw money at housing to keep foreclosure rates down. And that’s bad for the long-term prices of housing with Pocahontas being the tip of the spear.
Moving to locations with cheaper housing isn’t a real strategy for dealing with this very real and growing issue.
Cheers!
The mushrooming hyper inflationary depression is devouring the bottom 90%. Soon to be the bottom 99%. Shortages are profitable and green for the chosen few. The cultural displacement is outside their ken.
Whatever happened to the days when America was running a surplus in oil, and Our Country was energy rich, so to speak. Our Countries SPR was full to the top! Gas was around $2 Gallon, and the only time America spoke about Oil, was how great of a job Our Country did in becoming “Energy Independent” and how Low Gas Prices were because of these efforts. Companies were humming along, and things looked pretty damn good!
I even recall the days when travel was a bit of a hassle, due to long lines and the abundance of travelers, but so worth it, as your destinations were sure to be filled up and hopping with happy people enjoying the American Way of LIFE!!!
Oh how I yearn for the Good Old Days… If only we had a President like we had back in those days, who knew what they were doing and obviously Knew How To Do It!
I have not traveled at all like I used to, over the last few years. I just filled my tank when I needed to in those days, but now I watch the prices closely and fill up strategically based on price movements.
It is truly sad at how fast our Country has fallen, and in such a short period of time. It nearly feels intentional, and masterminded by the speed and accuracy of where and how it hit. Thankfully that train seems to be coming to a halt, but I am afraid to have the doors open, and see what I will be getting out to see. With all the hidden and manipulated data, I am perplexed as to what Our Country will look like when the Truth Is Revealed on where we are truly at in Our Country.
God Speed
You must be a pretty old guy if you remember America running a surplus in oil. That hasn’t happened since 1970 or so.
I don’t think he from here.
Those were the days when we had a President who shut down the economy, through 10s of millions out of work, and everyone had to work from. No driving, so low gas prices.
1) Biden hollowed up the strategic petroleum reserves.
2) The Fed hollowed up people’s bank accounts for an IOU, piling gov debt.
3) Few liberal states hollowed up 200K/300K people on medicare.
4) Thomas Friedman : hollowed up high tech KKK Israel.
5) Taiwan refused to be hollowed up by the Biden administration.
Where is the “ACCEPTED CONTRACTS” by the Energy Dept to start to refill the strategic reserves???
Not the “PREDICTED CONTRACTS”!!!
Irrelevant since there is no hurry to fill it back up.
The driving season is over.
GS lowering the chances of a US recession is akin to Jim Cramer recommending stocks that can ‘only go up’. Except GS doesn’t predicate their analysis on being entertainment like Cramer.
The United States has basically been in some sort of a recession since the beginning of 2022. But, leave it to GS to predict otherwise when a bunch of indicators start to take a turn for the worse.
For bankers and research analysts that get paid anywhere from 90k-400k, you’d think they’d offer better direction than the run of the mill mainstream garbage that is on par with Paul Krugman.
AI and robots will extract, refine, distribute. and even pump gas/electricity.
90% of humans need not apply. They’ll all be broke.
Let’s just replace ourselves completely.
“AI and robots will extract, refine, distribute. and even pump gas/electricity.”
All from little childbrains’ baby teeth!
After all, The Great Billionaires(tm) are “Investing” the loot that The Fed handed them, in Tooth Fairies!!! Tooth Fairies are the future!!
Oh, and the government is broke. They are proposing a $1.5 trillion deficit for the fiscal year beginning October 1. They are now detached from reality. Americans are now seaking safety from debasement in real estate in good school districts. Mama bear has spoken.
Mama, get me my gun cause the petrodollar is dead. The Saudi’s now know we won’t guarantee the “House of Saud” with our blood. We have two beautiful oceans between us and them. They want to unite EurAsia, well, let them because I don’t care. Everyone south of the Rio Grande wants to live in Vail and we can make that happen, except it will be a trailer park in Eagle, but they get to work in Vail. We can make that happen.
The full quote is “Mama! Get my gun. We’re gonna see who owns this farm.” Supposedly said by a farmer when he heard the British were marching on Lexington, Mass.
I see the spirit is still alive.
Inflation is abasing according to the experts, the regime, and obviously stock traders. According to Goldman, only a 15% chance of recession.ECB meeting next week and experts believe there will be no more interest rate hikes because the EU is headed into recession. China real estate is falling apart and they are deflationary. Somehow, none of this will affect the US markets so dramatically. Hey, US equities are selling at 23x earnings.
Rent is guaranteed to increase as money chases money. Higher paychecks are coming in January for the unions, the hourly workers, federal employees, and probably others. The wage price spiral will envelop the US by February.
If there is any disruption in oil, count on $150/brl before Christmas. Keep an eye on Iran.
Charge point and blink I believe are the two biggest EV infrastructure companies for charging stations. They haven’t been getting government subsidies, they are cash strapped and about to collapse. How’s that going to work with tens of millions of new EV’s on the road?
Go green energy go!
They haven’t been getting government subsidies, they are cash strapped and about to collapse.
Well what do you think the man in the White House will do when that happens? Big G to the rescue! Bailouts! Bailouts! Bailouts!
This is why it’s so hard to short this market, whenever you think something should crash, someone, somewhere pumps more money into the whole system.
At least XHB and home builders were down today. I still have puts on XHB for January 2024 expiry. I think I’m down 20k but JPOW won’t let me down!
Is Whole New Paradigm, Comrades!
Yeah, right. Like the monetary paradigm enables finance to rule and energy to ignore the sixth great extinction is a new paradigm. Ha!
Tesla is getting the money for the Chargers…and building out new locations like crazy. They are the dominant charging infrastructure in the US…and they work very well…vs the other two, which are rarely functioning well. 75%+ of the BEVs in the US are Teslas. This isn’t an issue for Tesla. They are profitable.
We’ll see if any of the other Automakers will actually step up in deploying Chargers. They say they are going to do so…but we will believe that when we see that. In the meantime, they will be able to access Tesla’s network in about 4 months or so.
The local Walmart has 8 chargers. They have a short line of cars waiting to use them. The other day, one of the chargers was down. Also, the other day, the gas station i usually buy gas, had all their pumps taped off.
It will be a 4 billion dollar+ business for Tesla from their calculations. Tesla turned the tables on Biden’s government for that one by convincing (it wasn’t hard) Detroit to use their standard for the chargers. By that they got government subventions when the legislation was tailored to exclude Tesla.
You cant do fracking without 0% money — its too expensive. 0% money should come back when Biden wins his second term and can continue the taking private of the country, bail out his rich buddies, and not care. We are back to where we were in 1970. The cheap oil (and subsidized oil) is running out.
The 70’s caused the downfall of the BIG Three Automakers…and the Rise of the Japanese.
The 20’s will cause even MORE of a downfall of the Big Three Automakers…and the Rise of the EVs.
The Chinese will sell way more EVs in Asia and Europe.
Tesla and others will sell way more EVs in the US and Europe.
OIL will continue to become less important strategically in the Developed World…as more and more people substitute out because of High Gasoline & Diesel Prices.
The Saudis will have to more even more of their money into Non-OIL investments.
Congrats to everyone that boarded the oil money train. Choo! Choo! DVN is moving up nicely the past few days and I sold covered calls at $57.50 (can’t get too greedy) for November expiry so let’s see how that pans out. DVN goes ex-dividend Sept 14 and will be collecting even more coin from it.
“Congrats to everyone that boarded the oil money train. Choo! Choo! DVN is moving up nicely the past few days and I sold covered calls at $57.50 (can’t get too greedy) for November expiry so let’s see how that pans out. DVN goes ex-dividend Sept 14 and will be collecting even more coin from it.”
Be wary of idiots touting the oil money train. Like I have said I am extremely leery of any shale oil stocks and I am even more leery of Realist claiming to make millions of dollars every day. DVN has declining production and has reduced its dividend 3 qtrs in a row. IMO DVN will continue to reduce its dividend.
Shale stocks may get pulled up along with oil price increases but I would not consider them medium to long term holdings.
Not quite sure why the bumbling idiot gets off on touting dividends like its nobodys business. I mentioned Pfizer today and incidentally PFE is paying a dividend today. Should I sound like a bumbling idiot saying choo choo PFE dividend Sept 5, collecting more coin. I must be some friggen genius. Extremely bizarre but what do you expect from an idiot. Better get a hold of Mish again for the ignore button moron.
https://www.whitetundra.ca/
I mentioned a Whitetundra website today. On the website you can also scroll down to Jan 29, 2023 Macro Outlook + Shale Update. He does a short mention of DVN energy at 3:15 ish and as well I generally agree with his outlook on the shale stocks.
I would also suggest looking at the latest Geohring report for their thoughts on shale oil. Not all oil will be the same on the oil money train. I expect some to get flushed down the toilet.
You are getting better roadrunner. More useful info.
Whitetundra is great. Shubham is great. Lots of technical info.
But he also invests in highly speculative small and micro cap oil plays. And he likes companies that use debt to give them more torque.
Nothing wrong with his approach, but it is highly speculative. “You” should tell people that.
I follow dozens of oil and gas pundits. Another Canadian is Eric Nuttall. He runs the largest oil and gas fund in Canada, the ninepoint energy etf. My investment philosophy lines up far better with his than with Shubhams at whitetundra.
His focus for the last few years is on Canadian oil sands companies, low or no debt, and a commitment to push management to reward shareholders through buybacks and dividends. I agree with his philosophy and my portfolio is closer to his than anyone elses.
My third “go to” guy is Josh Young at bison. He leans to more speculative plays like Shubham.
I also like Peter Linder, though he is just a 3 stock guy. WCP, CPG and NVA.
I have mentioned all of these pundits before. And they all provide disclaimers that people should pay attention to.
Most of the rest that I follow are more oil and gas pundits, not stock pickers. But good for info.
Go Papa Dave & his devotees! Go big oil! Woohoo!
I hope oil goes to $150 a barrel and lurches us into a recession. I drive a Prius and I’m a high school math teacher. Low gas consumption + recession proof job. Sweet!!!
A recession is the ONLY thing that’s going to fix massively out of whack home prices. And even then, we’ll need someone to muzzle Elizabath Warren clamoring for the now set in stone Pandemic-based rent & mortgage relief helicopter money.
Your recession mileage may vary ; )
Careful what you wish for. You just might get it and find out that your job is not truly recession-proof. If your city goes bankrupt in a bad recession then you might be the one made redundant.
I am glad you wrote this. I will bookmark it and save it. We’ll see how things turn out at the end of the year.
That’s all I ever wanted, for people here to put their money where their mouth is because talk is cheap. I assume you are going to short Devon? Anyone can call for a recession, oil to go up or down, or gold to go up or down or any other investments. But you clearly still don’t fully understand how I invest. I bought DVN and SOLD CALLS. I am simultaneously LONG and SHORT so either way I make money. The dividend is extra gravy on the money train. Choo! Choo!
There will be winners and losers, always have been always will be.
Lol. I just watched that WhiteTundra video and at the 3:22 mark DVN is listed as the top company. ROFLMAO. Choo! Choo!
all aboard, captain.
btw we don’t even have stagflation, as unemployment is negligible. nobody is out of work, that wants work. inflation full steam ahead. it’s always been cumulative.
ps don’t forget the FEDRESNY is privately owned and does all the computer currency inflation, to keep their owners, in high cotton. now guess who owns them? i’ll tip my hat this AM when i pass the FEDRESNY. the greatest hucksters this side of Vatican.
High cotton? Try Royal Oxford, most of my shirts are custom made from it. I wore these when I worked in an office, now they sit in my closet.