I think the issue is that everyone knows everything now. Oil is priced with all the context that is laid out in this article and every other piece of writing on the subject. Every drop is being accounted for by massive teams of really smart people with all the data in the world. Every new escalation, every new pipeline attack, every time a boat is blown up in the Strait of Hormuz, the price of oil reflects that effect in minutes. The oil reserves have been tapped and the situation is well modeled. An event like the East-West pipeline being blown up directly translates to higher oil prices because it marks a significant shift in the conditions that pricing models are relying on. There still seem to be significantly more negative impetuses than positive ones surrounding oil. Even if crude prices rolled over today, the read through on products will continue and translate to broader inflation. The stage is already set and the situation in the Middle East remains far from resolved.
"Does this leave oil more exposed given that reserves have depleted this much? No, not yet anyway."
I don't get the complacency. This is it. There is no more SPR. The Chinese are buying. There really is a limit to oil on the sidelines that can come in and fill the supply gap. We are hitting that limit. The Iranians will not relent before the midterms.
There is much more than 2 months left in the SPR, even more at the lower draw rate
China I've explained but can't comment as nobody knows the scale of reserves
The gap isn't as big as you might think it is. We haven't spoken of the Japanese or others with reserves either. It can't last forever of course and pricing is another thing, but the bearish case is that parts of the world run out. That part is Asia as the most vulnerable, which is what makes the Chinese nervous and unlikely to push a situation where some run out.
But this is where price steps in and balances supply and demand. $150 oil would do a much better job of balancing supply and demand than $100. “We aren’t broke yet honey there is still $134.52 in the checking account” is just insanity.
That's not what the market is saying. I think the weight of the evidence is on the side of supply deficit leading to new oil highs but maybe there are shadow barrels getting out that we don't know about.
A masterclass in a few minutes of reading.
best in the biz
great writers work hard so the reader doesnt have to
Absolutely excellent.
I think the issue is that everyone knows everything now. Oil is priced with all the context that is laid out in this article and every other piece of writing on the subject. Every drop is being accounted for by massive teams of really smart people with all the data in the world. Every new escalation, every new pipeline attack, every time a boat is blown up in the Strait of Hormuz, the price of oil reflects that effect in minutes. The oil reserves have been tapped and the situation is well modeled. An event like the East-West pipeline being blown up directly translates to higher oil prices because it marks a significant shift in the conditions that pricing models are relying on. There still seem to be significantly more negative impetuses than positive ones surrounding oil. Even if crude prices rolled over today, the read through on products will continue and translate to broader inflation. The stage is already set and the situation in the Middle East remains far from resolved.
"Does this leave oil more exposed given that reserves have depleted this much? No, not yet anyway."
I don't get the complacency. This is it. There is no more SPR. The Chinese are buying. There really is a limit to oil on the sidelines that can come in and fill the supply gap. We are hitting that limit. The Iranians will not relent before the midterms.
There is much more than 2 months left in the SPR, even more at the lower draw rate
China I've explained but can't comment as nobody knows the scale of reserves
The gap isn't as big as you might think it is. We haven't spoken of the Japanese or others with reserves either. It can't last forever of course and pricing is another thing, but the bearish case is that parts of the world run out. That part is Asia as the most vulnerable, which is what makes the Chinese nervous and unlikely to push a situation where some run out.
But this is where price steps in and balances supply and demand. $150 oil would do a much better job of balancing supply and demand than $100. “We aren’t broke yet honey there is still $134.52 in the checking account” is just insanity.
That's only really true if there's a deficit. If there isn't then what is there to balance
That's not what the market is saying. I think the weight of the evidence is on the side of supply deficit leading to new oil highs but maybe there are shadow barrels getting out that we don't know about.