Discover more from Kaoboy Musings

KAOBOY MUSINGS and its associated podcast KAOS THEORY focus on the intersection of Financial Markets, Macroeconomics and Geopolitics. I've spent 30+ years as a trader/hedge fund manager and now manage money for my family office across many asset classes.

Over 10,000 subscribers

Re: Oil-Different Dynamics Under Biden.

I see the potential for much higher oil prices under this Admin. Thoughts follow...

Michael Kao

Feb 7, 2021

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 energy initiatives, shale producers aren’t terribly incentivized to increase rig counts despite the recent rise in spot.

The only thing that gives me pause is the relatively high amount of spare capacity from OPEC+ especially if you include the prospect of Iranian barrels.

But given that OPEC+ is made up of all petrostates whose budgets are predicated upon MUCH higher oil prices, I’m guessing they will hold the line in supply longer — especially without fear of Trump tweets about high oil prices.

Biden’s signal to Saudi given recent policies: “You’re on your own now, and the US is OK with you being encircled by Iranian proxies on all sides.”

My predicted Saudi message to Biden: “Fuck you too. Prepare to pay much higher prices for oil.”