Some days in this world, the financial world, I find myself thinking about Bill Murray. True, he is a funny guy, but it is not him, exactly, that I think about – it is his movie, Ground Hog Day. Some days, it seems to me, I have lived this day before in this, my financial reality.
One reason is there are stories that just never die, that go on and on, and no matter how important they are to the economic reality of the market, they still seem overplayed, no, replayed, over and over again. No, I am not talking about the Fed and raising interest rates; I am talking about a truly important story, one that actually will have a fundamental, long-term impact on the market. I am talking about the incessant yet compelling story of oil.
- U.S. crude stocks surged nearly 11 million barrels last week, the biggest gain in 14 years, as imports jumped, while gasoline inventories unexpectedly increased, government data showed on Wednesday.
- Saudi Arabia reported record output in March.
The interesting thing about the story of oil these days is that I am now getting the impression the money behind the precious commodity is fighting for its life. I am now thinking the deep-pockets that bet on oil rising again are doing whatever they can to get the price back up, and they are losing.
Just a quick aside …
Did I just read in that news excerpt that “gasoline inventories unexpectedly increased?” Seriously? Don’t journalists do basic research anymore? Even I know that because of the excess oil production in the US, refineries have been working overtime to take the pressure of storage capacity, which, by the way, is getting close to the breaking point. Now, back to my main point …
The reason I am now thinking oil money is fighting for its life is I look at what has happened in the last two weeks with oil prices. The price of both Brent and Crude has had the opportunity to rise and rise substantially, based on geopolitical events, serious potential disruptions in the supply lines, but each time a threat has arisen (think Yemen), the price steps forward, and then it immediately falls back hard.
Technicians will tell you oil has found a bottom, and it will only go up from here, but I am not so sure. My simplistic view is that the world is rapidly transforming its energy requirements, and, in the middle of that, the US has found its groove on producing oil, and no matter what the Saudis do, this reality does not alter.
Russia, Venezuela, and all the other oil producers are fighting hard to remain relevant to their customers, price wise, and each is also trying to steal customers from one another with better deals. Add to that, Iran is finally coming to its senses and, within a near timeframe, Iran will likely be adding millions upon millions of oil barrels to the existing reality.
Fact: There is an oil and now gasoline glut, and unless demand goes through the roof this summer, that reality will continue day after day, and we will be talking about the same things day after day, as if time has stopped, for some time to come. Yup, some days I think about Bill Murray.
Trade in the day; invest in your life …
