OIL AND THE DOLLAR SQUEEZE...
Most think oil up must be accompanied with the dollar trading down, but the latest surge in oil has taken place with the dollar squeezing hard as well. Source: TME
Crude oil prices are booming and is now up 34.5% since late June BUT THIS IS NOT JUST A SUPPLY STORY - WATCH OUT DEMAND AS WELL!!!
The OPEC+ (Saudi/Russian) production cuts are the easy culprit to blame for higher prices. They do matter. But another equally important factor is booming demand. Bloomberg uses Department of Energy data for production, imports, and inventory changes to "input" the weekly demand for crude oil. Below is a five-week average to smooth the noise. Demand is through the roof! This suggests the economy is okay (aka "no landing") as there are few if any, signs of "demand destruction." The combo OPEC+ cutting back + demand booming = 34.5% crude oil rally in 10 weeks... Is there more to come? Source: Jim Bianco
This chart from Bloomberg shows the massive supply shortfall oil markets will face next quarter
OPEC expects a supply shortfall of more than 3 million barrels per day. If OPEC is correct, it would result in the biggest inventory drawdown since 2007. Voluntary production cuts by OPEC members are removing 1.3 million additional barrels of oil supply every day. Higher oil prices are back and the US reserves are at record lows. Source: Bloomberg, The Kobeissi Letter
Cartoon humor
Source: hedgeye
Brent oil vs. Citigroup global inflation surprises index
Oil price usually lead inflation 👇 The recent uptick in oil price will be probably not enough to materially change inflation surprises, but should oil continue to go up it would start to have an impact. Source: Michel A.Arouet
Is oil once again becoming a political commodity: Russia and Saudi Arabia are cutting oil production at the worst time for the Biden administration (hint: next year is an election year in the US)
Source: Bloomberg, HolgerZ
Is oil going to $100?
U.S Crude inventories fell by WAY more than expected ( -6.3mm (-2.1mm expected) to their lowest since early December - and are well below their five-year average for this time of year as the summer driving season ends. Including the SPR (Strategic Petroleum Reserve), this is the lowest level of total crude inventories in America since 1985... Source: Bloomberg, www.zerohedge.com
While WTI oil hit $86, the rig count is still in plunge mode...
*A cumulative $4.9T of investments in global upstream oil and gas are needed by 2030 to meet market needs and prevent a supply shortfall" ---International Energy Forum (IEF) and S&P Global Commodity Insights. Source: Lawrence McDonald, Bloomberg
