Oil - Who would have thunk it?
Macro Perspectives
We open the week with this spike in oil prices.
This 7% rise comes from relatively low prices of a year ago, but, as you can see, this is a significant trend break. Moreover, the fundamental picture is ominous (ominously supportive of much higher prices).
So, what was the catalyst of today's price spike?
Oil producing countries (OPEC+) decided to cut production into a structural-deficit supply market (structural deficit from non-OPEC+ underinvestment in future production).
Why the cut?
Because they can. We should expect them to continue to do everything in their power to maximize revenue on every single barrel of oil they sell, plus they have a lot of power these days.
Not only has power and leverage been ceded by the Western world, in its pursuit of the clean energy agenda, the anti-oil policies are agitating countries that rely heavily/primarily on revenues from oil production.
On the latter, this is precisely why we're beginning to see China, opportunistically, step-in, and promote a movement to buy oil from OPEC+ in yuan, or other non-dollar currencies (rather than dollars, the global standard).
China is filling the void left by the Western world, gaining valuable access to global oil supply, gaining influence-while diminishing Western world influence, AND simultaneously threatening the dollar's role in the world, and, therefore, threatening America's global leadership status.
On oil prices: It's important to understand, the reprieve from triple-digit oil prices has only come as the result of market manipulation (from the U.S.). And unfortunately, that manipulation, to satisfy short-term political gain, has created an even greater position of weakness.
Because of this:
Over the past sixteen months, the President has drained 40% of the U.S. Strategic Petroleum Reserves in effort to manipulate the price of oil lower (and therefore gas prices).
It has worked. But as we've discussed here in my daily notes, it's temporary and the U.S. will be forced to restock those reserves as prices are moving higher, which will only exacerbate the rise.
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