* Oil/USD Wrecking Ball Substack Directory *
2/7/21 - Re: Oil-Different Dynamics Under Biden.
Re: Oil-Different Dynamics Under Biden.
Biden has clearly signaled a pivot back to Iran concomitant with abandonment of Saudi Arabia: 1) halting arms sales, 2) halting support of against Shia-backed Houthis in Yemen, 3) recalling the Nimitz from the ME. Although I’m fond of saying that the cure to high prices is high prices, between the steep backwardation in oil and Biden’s various green ener…
2/12/21 - Re: Oil-The Significance of Backwardation.
Re: Oil-The Significance of Backwardation.
With the curve backwardated $9 to ’23, history predicts that more often than not, much higher spot prices will follow. Spent the day looking at historical contango-to-backwardation flips, and in 7 out of 11 such scenarios since 1988, spot prices were significantly higher in the following year.
2/23/21 - Re: Oil-Best Inflation Hedge?
Re: Oil-Best Inflation Hedge?
From JP Morgan: “Energy outperforms other sectors when US headline CPI is above 2% and rising. However, on a volatility-adjusted basis, returns from energy are largely comparable to the broader BCOM.”Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
3/5/21 - Re: Oil-Notes From Capital One Oil Call.
Re: Oil-Notes From Capital One Oil Call.
OPEC+ meeting “was a shock.” Especially notable: SA’s decision to roll over its voluntary cuts. With 6 months of consecutive supply draws, YE’21 global inventories will be below the OPEC+ "safety stock" target of 2.75B bbls. This has led to serious price spikes in the past.
3/8/21 - Re: Oil/Macro-This Butterfly Has Big Wings.
Re: Oil/Macro-This Butterfly Has Big Wings.
“Capex commodities” include lumber and industrial metals that are required for building things. “Opex commodities” like food and especially energy/oil (the biggest cap-weighted commodity by far) are consumed on an ongoing basis just for human survival.
4/12/21 - Re: Oil-Will Shale Ruin The Party Again?
Re: Oil-Will Shale Ruin The Party Again?
At the risk of saying “this time is different”, I’m going to say that this time is indeed a bit different from the past from a number of angles. First, US public E&P’s are much more focused on capital discipline and shareholder return than years before. I’ve said often that one of the biggest risks in investing in the public E&P space is capital realloc…
4/21/21 - Re: Oil-When Will EV Adoption Cause Peak Oil Demand?
Re: Oil-When Will EV Adoption Cause Peak Oil Demand?
First, the short-term picture for oil demand. Pre-COVID, we were at ~100 mmbpd. Currently, we're at 95 mm bpd. YE21 we will be at ~98 mm bpd; YE22 we will be at 102 mm bpd. Here are some predictions for global EV penetration, courtesy of Capital One: 5.8% for '23, 11% for '25, 26% for '30, 57% for '40. EV unlikely to materially impact gasoline demand unt…
6/1/21 - Re: Oil-ESG “La La Land.”
Re: Oil-ESG “La La Land.”
Michael Cembalist from JPM recently published his “2021 Annual Energy Paper.” A summary follows. First, let me preface this thread by saying that I’ve never seen such a wholesale mobilization of economic/political capital towards a goal – decarbonization – that to me is more about political zealotry than science.
7/23/21 - Re: Oil-Update on OPEC+ Agreement/Delta Worries.
Re: Oil-Update on OPEC+ Agreement/Delta Worries.
To give some context to this update, this was what I presented on @realvision 3 months ago. https://www.realvision.com/shows/the-expert-view/videos/is-crude-oil-the-best-inflation-hedge-and-other-oil-questions-9vpD?utm_source=twitter&utm_medium=social&utm_campaign=2021422_EXPVIEW_MR_TW_W1_LINK&tab=details
8/19/21 - Re: Oil-Is China Painting The Tape?
Re: Oil-Is China Painting The Tape?
She believes that current “fair value” for Brent is $74 (vs. close of $66.56 today) and that the current prices implies a demand hit of 4 mmbpd from July. Interestingly, high-frequency data for the 1st 2 weeks of August indicate global demand holding STABLE at 98.6 mmbpd MoM — even “adjusting for losses for China and RoA.”
9/27/21 - Re: Oil-GS Call for $90 Brent by YE’21.
Re: Oil-GS Call for $90 Brent by YE’21.
“This dynamic has led to a historic 4.5 mb/d deficit, which should lead inventories to fall to their lowest level since 2013 by year-end...” Two charts tell the story. Here’s supply:Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
10/7/21 - Re: Oil Export Ban-Could the Admin be THAT stupid?
Re: Oil Export Ban-Could the Admin be THAT stupid?
Yesterday, apparently, it became an official talking point. I believe that this talk + the SPR talk were the 2 main culprits behind the recent oil correction, aside from the obvious point that the market had been on a crazy tear and that nothing goes up forever in a straight line.
10/8/21 - Re: Oil-JP Morgan Call Highlights.
Re: Oil-JP Morgan Call Highlights.
JPM thinks COVID is about to peter out based upon the 1918-19 analog of 4 waves lasting 20 months. Mobility trends are corroborating this. Oil is still cheap relative to other energy commodities. Coal prices are implying $150-$200/bbl for oil.Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a f…
10/14/21 - Re: Oil-Convo with Javier Blas, Bloomberg’s Chief Energy Correspondent.
Re: Oil-Convo with Javier Blas, Bloomberg’s Chief Energy Correspondent.
Key question on my mind has been the topic of OPEC SPARE CAPACITY. I mentioned that Cap One’s out-of-consensus view that GCC countries (especially KSA) were heavily investing in spare seemed at odds with this tidbit that Javier reported on: Having known AbS for 20 years, Javier thinks that KSA oil policy under AbS will err on the cautious side. He thinks…
10/21/21 - Re: Oil-Latest Macro Thoughts From Cap One.
Re: Oil-Latest Macro Thoughts From Cap One.
Near-term YE Demand Forecasts: 2022-101.7 (vs. JPM 101.3) 2023-102.9 (would have hit in 2022 without COVID)Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. Lakshmi points out she is on high end of street and doesn’t see much upside to her numbers.
11/19/21 - Re: Oil-The Admin’s “Kobayashi Maru.”
Re: Oil-The Admin’s “Kobayashi Maru.”
Despite pursuing a myriad of policy missteps that have simultaneously alienated OPEC+ and disincentivized investment in the domestic O&G space, the Admin has embarked on an unwinnable rhetorical war against rising energy prices. I have been speaking with several industry experts over the last several days and have compiled a list of FOUR possible policy …
12/16/21 - Re: Oil and the USD Wrecking Ball.
Re: Oil and the USD Wrecking Ball.
I am going to pull some of these thoughts together here. Since the current decade is already looking like the 70’s in many ways (ignominious defeat on the global stage, energy crisis, inflation, new ABBA album, etc.), let’s go back to something else that happened in 1974: the establishment of the PETRODOLLAR system.
1/30/22 - Re: BTC/Oil/USD/MSTR-Tying It All Together & The “Ummwut” Umwelt.
Re: BTC/Oil/USD/MSTR-Tying It All Together & The “Ummwut” Umwelt.
Last year I got captivated by octopuses (these things happen) and read several books on cephalopod consciousness, and an interesting word caught my eye: “Umwelt.” “Umwelt”: “the world as it is experienced by a particular organism.” For instance, it is hard for us vertebrates to envisage the umwelt of an octopus that has invertebrate, distributed intellig…
3/13/22 - Re: USD Wrecking Ball World Tour & The CNY Facade.
Re: USD Wrecking Ball World Tour & The CNY Facade.
I’ve written about the determinants of RELATIVE value for currencies. While Debt/GDP is one factor, a myriad of other factors go into the determinants of “safety and soundness.” This thread talks about geographical/geopolitical determinants of value:
4/27/22 - Re: Oil-Trying To Cut Through The Noise.
Re: Oil-Trying To Cut Through The Noise.
Cap One provided some useful data points today in a client call, which I will summarize below. Obviously, A LOT has happened since my last update 6 months ago, but I still think signal:noise is very low right now. Rather than give the illusion of false precision, I'll cover broad strokes which I hope to be generally accurate.
7/5/22 - Re: Geopolitics/Oil-Conversation With Velina Tchakarova.
Re: Geopolitics/Oil-Conversation With Velina Tchakarova.
Russia will NOT stop its current incursion into Ukraine until it has FULL CONTROL of the Donbas region. Then, and only then, will Russia potentially proclaim a unilateral ceasefire to "give itself a break." Importantly, this will most likely happen on Russia’s terms and NOT because of any demands from the West. She is not seeing any near-term paths to de…
9/4/22 - Re: Oil-Forward Curves & Holy Grails (or Lack Thereof).
Re: Oil-Forward Curves & Holy Grails (or Lack Thereof).
First, let me dispel the notion that there is an easy, tried-and-true leading indicator/model for predicting price movements of Oil, or for that matter ANYTHING. Ridiculous notions of “stock-to-flow/halving models” for $BTC come to mind. Second, let me dispel once and for all the notion that CURRENT FORWARD prices in the curve reliably predict FUTURE SPO…
12/18/22 - Re: Oil-High Level Macro Thoughts For My LPs.
Re: Oil-High Level Macro Thoughts For My LPs.
“The macro outlook for oil is complicated going into 2023, characterized by a tug-of-war between forces of supply curtailment (EU embargoes/price caps on Russian oil and products + OPEC+ quota cuts) and forces of demand destruction (global recessionary headwinds clouded by China’s troubled COVID reopening policies).
12/22/22 - Re: Oil-The Great China Re-Opening (Or NOT).
Re: Oil-The Great China Re-Opening (Or NOT).
Yesterday, Lakshmi from Cap One put out her last note of the year and focused on PRODUCT demand. Remember that refiners consume Oil, and consumers consume products. Some sobering charts follow:Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
2/25/23 - West Point Paper: “US Dollar Primacy in an Era of Economic Warfare”
West Point Paper -- Part 1/4
Introduction US national security is now firmly focused on Great Power Competition (GPC) and how to reorient policies to face the country’s challengers. Competition with China in particular is now front- of-mind, but the list of additional challengers will likely grow. The US-led Rules-Based Order (RBO) is changing in an increasingly multipolar world. Ne…
3/26/23 - Re: Inflation/USD/USTs – “Risk-Free” Riskiness & Austrian Pipe Dreams.
Re: Inflation/USD/USTs – “Risk-Free” Riskiness & Austrian Pipe Dreams.
In recent weeks, I have read many incorrect and misleading takes on Twitter by folks who are decrying recent interest rate volatility as some kind of “false advertising” of the term “Risk-Free” when it comes to US Treasury securities (USTs). These takes go something like this:
4/2/23 - Re: Oil/Inflation/USD-Clash of the Titans.
Re: Oil/Inflation/USD-Clash of the Titans.
The Greek mythology nerd in me can’t help thinking about this old 80’s flick given today’s surprise OPEC+ cut:
4/7/23 - Re: Geopolitics/Oil/USD - BRICS-a-Brac?
Re: Geopolitics/Oil/USD - BRICS-a-Brac?
Dictionary.com defines “Bric-a-Brac” as “miscellaneous objects and ornaments of little value.” Despite all the recent hyperbole about the BRICS (Brazil, Russia, India, China, South Africa) nations forming a challenger to the USD, I believe it will amount closer to "Bric-a-Brac” than GRC contender.
4/15/23 - Re: Oil/Inflation-Supply/Demand Curves & OPEC+'s Fantasyland.
Re: Oil/Inflation-Supply/Demand Curves & OPEC+'s Fantasyland.
Two weeks ago, I wrote about OPEC+’s decision to jump into the Geopolitical Mosh Pit with its surprise cut of 1.65 mmbpd of Oil production: Unfortunately for all of us and ultimately for OPEC+, I believe the Fed will ultimately win this Clash of the Titans.
5/6/23 - Re: Oil/Inflation/Geopolitics - Squid Game Tug-of-War.
Re: Oil/Inflation/Geopolitics - Squid Game Tug-of-War.
The Clash of the Titans between the Fed & OPEC+ could cause a Toxic Tug-of-War between Inflation and Deflation with a "Squid Game" outcome. I will build my case with several key observations.Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
5/24/23 - Re: Oil-Deep Dive & The Supply/Demand Singularity Revisited.
Re: Oil-Deep Dive & The Supply/Demand Singularity Revisited.
For those of you who have followed me for a while, you know that I’m neither Perma-Bull nor Perma-Bear. If there’s anything I’ve learned in my years investing in the Oil Patch it’s that remaining religiously wed to an investment thesis even when the facts are changing can be extremely hazardous to your financial health
6/7/23 - Re: Oil/Investing - Lessons From The Oil Patch / Will Atlas Shrug?
Re: Oil/Investing - Lessons From The Oil Patch / Will Atlas Shrug?
Investing in cyclical industries, especially Commodity Cyclicals, can be a very tricky business. You can get the Micro-fundamentals right but get killed by Macroeconomic Black Swans. Conversely, you can get the Macro direction right but still get blindsided by Micro issues at the Company/Regional level and/or unexpected Geopolitical developments.
7/22/23 - Re: USD/China - The Donkey Kong Dollar Peg.
Re: USD/China - The Donkey Kong Dollar Peg.
Like many kids who grew up in the 70’s and 80’s, I was an arcade game junkie. One of the games I invested countless quarters in was the endearing Donkey Kong, in which a lovestruck Mario braves numerous challenges to rescue the Princess from Donkey Kong, who has taken her captive.
9/6/23 - Re: Inflation/USD - The Four Horsemen of US Resilience Will Make the Fed an Uneven "Distributor of Pain."
Re: Inflation/USD - The Four Horsemen of US Resilience Will Make the Fed an Uneven "Distributor of Pain."
I recently wrote a piece in which I compared the Fed to Ivan Drago, who famously said “I must break you” to Rocky in Rocky IV. As with most analogies, this one is imperfect, because in my Bizarro version of this tale, the Ivan Drago Fed will be the last man standing in its Inflation Fight.
10/21/23 - Re: Inflation/Oil/Gold/Yield Curves - Revisiting Bear Steepening, Recency Bias & That 70's Show.
Re: Inflation/Oil/Gold/Yield Curves - Revisiting Bear Steepening, Recency Bias & That 70's Show.
Revisiting Bear Steepening In June, 2022, I wrote a thread that proposed an “out-of-the-box” solution to the Fed’s dilemma of how to cure Inflation without potentially also creating a Credit Crisis. In short, I said that the Fed and Treasury needed to work together to
4/6/24 - Re: Macro/USD/Oil/Geopolitics - The Battle of the BADS.
Re: Macro/USD/Oil/Geopolitics - The Battle of the BADS.
Most of you know my “Is that BAD?” gallows humor quip that I use on the litany of doom-and-gloom posts I see all the time. The sad fact is that there are so many real-time Scylla/Charybdis Dilemmas facing policymakers where they are forced to choose between TWO BAD OUTCOMES.
Re: Oil/Inflation/USD - From USD Wrecking Ball to USD Pickleball?
The USD has weakened recently, both on weaker economic data but mostly on Trump's surge in the polls, given his stated preference for a Weaker USD. I see three paths the USD Wrecking can be downgraded to the USD Pickleball, but only one path that's likely to end in the Kitchen.
Re: Inflation/USD/Oil - The Return of PP and the Coming of PPPP.
I had a friend who used to call JPOW “P*ssy Powell” given his needless juicing of the Post-COVID economy in 2021 with continued massive QE on top of massive Fiscal Support — long after the economy had not only recovered but after asset bubbles had formed all over the place. Remember NFTs?
Re: Inflation/USD/Oil - From Fed's Best Friend to Fed's Worst Enemy.
Pusillanimous Powell's Premature Pivot has turned the USD's Equilibrating Mechanism from the Fed's Best Friend into the Fed's Worst Enemy by potentially igniting a Competitive Cutting Cycle.Kaoboy Musings is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Guest Lecture at Denison University: The Geopolitics of Energy & Economic Warfare.
Professor Scott Smitson and I met at West Point 2 years ago, where we both presented policy papers on various aspects of National Security, and we have since collaborated on multiple projects (see section at end for links).
Interview: Oil/Macro/Geopolitics/Investing Discussion with Paul Sankey.
First time interview with Paul Sankey. This was a wide-ranging conversation about the current tumultuous Macro and Geopolitical environment, with extensive Show Notes on Tariffs & Current Events.