Click For Photo: https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/max_650x650/public/2019-05/houston%20problem%202.jpg?itok=Oz8WiSYt
Back after a couple days on the road and would have to say I missed watershed price action.
I have constantly seen over the past few years the market underestimating the effects of a meaningful rise or fall in crude oil prices. First in 2014 when most economists thought falling oil would be a stimulus (wrong, collapsing production killed growth and the petrodollar) and then in 2017-2018 when rising oil helped provide the market with an inflationary impulse when most were stuck in a lowflation mindset (inflation rose and put the Fed into a consistent hiking cycle).
Week - Crude - Oil - % - Bull
This week, crude oil has fallen over 7% and it’s safe to say the bull market WTI has been in since December, is now over.
I find the 7% collapse in crude this week more than interesting. What is the read through here that prices are collapsing in the face of multiple bullish elements such as:
Product - Demand - Momentum - Sulfur - Output
OMO 2020 product demand starting to gain momentum (this is the marine sulfur output story where cargo ships will need a higher quality of crude to omit less sulfur).
If all that supply disruption and disruption potential is not able sustain WTI over $60, we must make the read through that global demand, and thus global growth, is weak. That is the important signaling here. That was confirmed by the IEA last week who cut global oil demand from 1.4m bpd to 1.3m bps and the IEA’a Atkinson who indicated that that lower oil demand growth outlook was “modest” and there was “no demand shock.”
Breakdown - WTI - Moment - Readers - Indicators
The breakdown in WTI could not be coming at a more inopportune moment. Regular readers will know that I focus less on lagging indicators such as the unemployment rate and more on forward indicators such as PMI’s. Doing so has allowed to accurately project the current economic environment...
Wake Up To Breaking News!
Aim and timing is evereything.