Oil seen in context of recent events...
Here with the OXY chart used more as a backdrop or as a calendar page with price functions...unannotated...
Ignoring here OXY's prior history and relative "value" arguments... using it as an "oil price proxy"... to break down price vs recent issues in the market...
Prior to 2020... Trump fostering US domestic production... meant loosing global supply to feed China growth and others... a surplus developing as US production grew drove prices lower into 2019... while putting $ stress on other producers... notably Russia and Saudi Arabia... struggling to pay bills with declining revenue.
TPTB didn't like seeing that success occur... so orchestrated efforts to remove Trump... including crashing the market... "implementing control" while destroying functional democracy and elections and replacing them with variant brands of national socialism... everyone's a NAZI now... and with huge lagging impacts in the subsequent demand destruction. Post crash, as the end of Trump's time neared, a massive surplus roiled the markets... driving prices negative... with the dynamic driven by "an old fashioned gas price war" between two filling stations competing for future market share... Saudi Arabia, and Russia... capping prices more.
Then... the election... the voters rejecting TPTB's gambit and re-electing Trump anyway... forced them into conducting a coup... and exposing themselves in doing so... as necessary to wreck what Trump had enabled... versus what they had planned...
Biden, of course, overtly hostile to energy production... only more if it is enabled inside the U.S. Oil spikes higher on election day, and continues higher as within months Biden fosters and hard wires the re-enabling of US dependence on foreign suppliers... all of whom, at the same time, he alienates in epic fashion... as he quickly reduces the forwards in American participation in the market... As the consequences of that set of policies emerges... no change in policy ensues... but a series of market manipulations are unleashed in order to "force prices lower" as the reality of policy impacts resulting in higher prices fosters growing risks TPTB care about, more as people become aware of "their brand" and its influence.
Ignoring non-oil related impacts... the current situation:
First, American production continues its decline, as Biden's overt hostility is sustained... showing he is slavishly willing to accommodate terrorists, the worst tyrants in the world, and America's sworn enemies... more than meeting the needs of American domestic oil producers. And although they lie about production "rising" by focusing on what fudged "forecasts" say about "soon"... and by ignoring "accelerating production" without an accelerating pace in replacement... only fosters a growing "cliff edge" coming "soon"... Canadian potential might replace some of that lost... so, means of transport, and even the borders are obstructed...
The other element in American "control" of prices... is market manipulation... now used alternately to kneecap the market and drive prices lower with overt efforts paired with PR fictions (SPR releases) more focused on "optics" in political BS than on reality (but, still, coordinated with "the trade")... or, conversely, used to drive unsustainable vertical moves in the short term... in order to drive prices lower in a collapse (just as done with gold in 2011, etc.). Or, as we saw this week... both at the same time... The only maneuver space available for any of that is "above" the base price... the political element in maneuver still only "noise" they want for "optics"... with a primary goal in "higher than OPEC base prices" over time... both to use oil prices as a throttle in lieu of interest rates... while carving profit out of manipulation of "the trade" instead of "production" while working only in the operating space above the base price. An "oil price collapse" just now... "coincidentally" linked to an interest rate rise of 0.25% tomorrow ? LOL !!!
Second, OPEC alone now controls primary production and the base price. The rest is noise. Any effort to enable change in that reality... will require many billions in sustained investment and more than two years time to begin having any real impact. "Drill Baby, Drill"... did not change things over-night ? Biden seeks "a respite from rising prices" by begging OPEC to produce more... and they won't even take his calls. So, he begs others... who have no real capacity to matter. "Literally, I do not care" was the answer from the Saud's when asked about that. Historically, American's cooperation with the Saud's (and others) to defend the Middle East from Russian threats to take it by force... have conditioned OPEC relations with the west. Today... Russia can't even fight its way out of Russia, into what used to be Russia... and other options exist in seeking weapons supplies or cooperative security. The Saud's long friendship with America... is probably not over... the issue being "Biden" and not "America"... with Americans only having more in common with Saud's now... as "Literally, I do not care"... defines common ground... as we wait for "corrections"...
Third, Russia... producing almost 10% of global supply... is being removed from the market... and there is no ability to replace that being lost. OPEC cannot begin to replace the loss of 10% of supply. There will be attempts in accommodation... oil sold (at a discount) to China and India instead of Europe and U.S., and, that will "work" to absorb what can be moved to those markets in the short term... but it will take years to accomplish... not days, weeks, months or a few years... many years. The infrastructure does not yet exist. Tanker rates might soar... without the few ships we have being able to put a dent in moving 10% of global production... And in that time it takes to "re-balance", there will be atrophy and loss...
The world is going to feel the impact. That blow is still coming... normally, expect a lag time of 30 days or so between event and "seeing change in the level in the tanks"... including that the "shutdown" is being stretched into a grace period of 45 days...and that still coming PRICE impact may be ameliorated in perception in having had prices being run higher first... front-running the trade in essence... ? That might mask a "wiggle" in supply variance of... one percent ? Not ten percent.
Will re-look... I can see the chart impact on price... in the inverse with a supply in surplus... in the 2020 event ? What percentage change in production has unfolded in that time period from 2019 to present... ?
And,. "demand destruction" as a driver... as 10% of global supply is removed ? LOL !!! Really ?
Events since 2020... as seen in prices of everything... have been driven by SUPPLY SIDE FAILURE... the breakdown of supply chains as "trust" fails. And what we see happening today... vis a vis Russia in relation to energy... is a deliberate destruction of SUPPLY... and NOT the imposition of a surplus... as occurred in 2020 ? Oil price stability... enabled as production controls... is a primary OPEC goal.
What I see recently.... is an obvious attempt in "misdirection"... selling you on... prices are too high already and we will see demand destruction because of it... That's BULLSHIT... being fanned in the calm before the storm... and also suggesting... they're fully in control of this... What I see is...
They don't got this....
OPEC can't fix it for them...
Without yet having done the maths... what I think you should expect will occur... in scale... will look something like... flipping this OXY chart upside down... not focusing in on the "extreme" move made in March this year ?
And, there's that "exponential" thing again... that has people mistake what happened in March as... "big"... and thinking it probably means the trade is over, now...
And, yes... oil does function as a proxy for interest rates in its impacts... only with vastly faster transmission through the economy... and inverting the OXY chart as a guide to what's coming... suggests much more...
But, in current focus... it suggests the focus on the "market noise" in the SPY / UVXY focus and tiny, tiny little shifts in interest rate policy... in context of "calm before the storm"... is probably all and only a distraction from the focus on the timing and lag times that matter in "real things"... as events WILL unfold... BY FORCE... as the reality of REAL IMPACT in what has been done... begins to "ripple through" supply chains... We saw a "first move" in March, only indicating "change afoot" as early movers moved... from there, we move into an initial ramp into impacts landing over the next 30 days... and "recognition events" beginning a second ramp... guessing... in around 45 days...
Or, just see it as... March 2022... is the inverse of the move made in March 2020... on the OXY chart.... and that perhaps defines the "pivot" around which the chart functions need to be inverted...
 |
