"Lower For Longer" -- Probably Not -- May 22, 2018

Updates

Later, 9:44 a.m. CDT: right on cue.  I remember being taken to task several years ago suggesting we would be seeing $5 gasoline. Well, here it is, and crude oil is at even lower prices than it was when I first talked about $5 gasoline. Scary, huh?

Later, 7:59 a.m. CDT: right on cue. Note the "soaring gasoline prices" in the graphic below. If the EIA wanted to "really show" the "soaring gasoline prices" they should have changed the x-axis from $0 to $4 to $2.50 to $3.50 per gallon. Gasoline prices are almost exactly the same as they were in 2005, and significantly less than what they were in 2009. Our cars are getting much better mileage and most of us are now driving EVs anyay.

Original Post

Fake news: the stories about "high-priced crude oil" and "high-priced gasoline" are starting to increase by and by this time should be the #3 story next week, with the Mueller investigation #2 and the Stormy Daniels-lawyer story #1. I would assume the Hillary "war room"; Obama's "deep state"; and, the George Soros-Bernie Sanders-Pocahontas axis will pour gasoline on the fire to keep it going. We already have an oilprice headline that "farmers are reeling from high oil prices" and are ready to lock in current diesel prices. Okay. Whatever.

WTI: a slow newsday? Speaking of oilprice, there "front page" has not changed since last night. Usually it changes every 35 minutes.

Equity markets: insane. Unfortunately I am in an undisclosed location that has no television so i cannot watch CNBC. But with regard to the equity markets, one word: insane. There's an old adage in investing: keep one's powder dry. This says that folks should keep some money in cash to be ready to invest when the market drop significantly (or when a particular stock, for whatever reason, becomes "attractive"). I wonder if anyone has ever done any studies on that advice. Another piece of advice, "sell in May, go away." I wonder "when" in May  one should sell. This year, it appears that "late" May will turn out a lot different than "early" May. Right now, the Dow, after rising almost 300 points yesterday, could open as much as another 300 points higher.

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Pet Peeves

Back to WTI: over at Bloomberg via Rigzone -- "forget $80-oil The big rally is in forward prices." What a great time to re-read this post on "crude oil -- the next five years." This post is already, based on page views, one of my most popular posts. It remains "free" to subscribers. The subject line says it is still "in progress." I had planned to add some comments. Not sure if I will. Everything moves so quickly, anything I post now will look like "Monday morning quarterbacking.

But if I read that article correctly, the writer, "Goldmoney" (in Yiddish, "geltgelt" or "Hanukkah gelt" or just plain, "gelt." In Norske, "lefselefse." And in the pizza world, "pizzapizza") -- now I forget where I was going.

Oh, okay. If I read the "Goldmoney" article correctly, the writer, appears to be suggesting "we" are in a contango environment. If I understand the term correctly, the writers at Bloomberg (the first link) are suggesting the same thing:

Brent crude oil grabbed all the attention after spot prices hit $80 a barrel last week. And yet, almost unnoticed, a perhaps more important rally has occurred in the obscure world of forward prices, with some investors betting the "lower for longer" price mantra is all but over.

The five-year Brent forward price, which has been largely anchored in a tight $55-to-$60 a barrel range for the past year and a half, has jumped over the last month, outpacing the gains in spot prices. It closed at $63.50 on Friday (May 18, 2018).

"For the first time since December 2015, the back end of the curve has been leading the complex higher," said Yasser Elguindi, a market strategist at Energy Aspects Ltd. in New York. "It seems that the investor community is finally calling into question the 'lower for longer' thesis."

Bob Dudley, the chief executive of oil giant BP Plc, coined the "lower for longer" mantra in early 2015, warning of a protracted period of cheap crude. He later clarified that he meant "lower for longer, but not for ever."

Early in the article, this line:

Over the past three years, long-dated prices had been weighed down by the belief the growth in U.S. shale production, combined with the adoption of electric vehicles, would keep prices under control.

My two pet peeves:

• any suggestion that Libyan oil production is still relevant in the big scheme of things
• any suggestion that the adoption of electric vehicles is keeping the price of oil down

Oh, yes, a third pet peeve,

• any suggestion that global warming is already affecting us

Again, I digress. Back to the Bloomberg article. Actually nothing more to say. As soon as I saw "electric vehicles" in the article I knew it was time to move on. And that's too bad, I was on a roll. LOL.

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As Promised

Anyone Who Had A Heart, Cilla Black