OPEC back in Charge...

Macro Perspectives: Wed 25 Nov 2020

Stocks are back at record highs.

Bond prices are (still) near record highs.

Copper, an industrial metal that tends to be an early signal of an economic turning point, is nearing a breakout to a seven-year high.

All of this, while oil, the most highly traded commodity in the world, remains more than 30% lower than the highs of just this year.

But oil is on the move - the day before the election, oil made a low of $33.64 a barrel - now up 34% from that level.

Also, as shown in the chart below, the horizontal line is the highest price traded in the crude oil market in the past eight months. That was broken yesterday.

What's most interesting, is that this move in oil comes as money is pouring into electric vehicle related stocks (the anti-oil trade).

This demand for electric vehicle stocks is, of course, driven by the clean energy/Biden plan. With a presumed next President that has vowed to kill the fossil fuel industry in the U.S., most would expect oil prices to be heading toward zero.

The caveat as we discussed earlier this month, if Biden regulates the U.S. shale industry into extinction, OPEC will be back in charge - oil prices will go much higher, even in a world that’s transitioning to cleaner alternatives to oil.