Pages

Thursday, May 26, 2022

Calling It A Day -- May 26, 2022

It's the last day of school for Olivia and Sophia. I'll be involved with some last-school-day activities with Sophia -- an ice cream social for her entire school! 

So, I'm going to call it a day for now. I'll probably post some stuff later tonight if it's worth posting, but for now going to take a rest. 

WTI surged as much as 4% earlier this afternoon but has since settled back to 3.41%, up $3.76, and trading at $114.10.

From an investment point of view, I'm no longer much interested in the day-in, day-out trading range of WTI. I'll still follow it and will still report it but I'm not interested in following it from an investment point of view. 

I'm more interested in seeing how this plays out.

Some analysts suggest that oil will drop back significantly (for any number of reasons) and we could see it move back to $80 or less.

I don't see that. I have trouble believing that oil won't go significantly higher once the driving season starts -- upwards of $120 or more. But others say this won't happen.

So, I'm more interested watching what might drive the price of oil back to $80 or less. Everything I read suggests just the opposite. So, we'll see.

I'm also interested in the steps the Biden administration will take to try to bring gasoline prices down. I don't see many arrows in their quiver or tools in their toolbox to have much of an impact on lower prices at the pump.

"Everybody" keeps talking about "oil" as in "oil production. That's not the long pole in the tent right now regarding the price of gasoline at the pump. The long pole is refining capacity as well as the impact of plain old inflation. 

However, six months from now, "oil" as in "oil production" may become the long pole in the tent as Russian oil production starts to fall significantly. There was an interesting story earlier today suggesting that Russia and Saudi Arabia (and the US for that matter) produce about the same amount of oil each day. The Saudis do that with 2,000 wells; the Russians, with 40,000 wells, if I recall correctly. 

Not only does Russia need to maintain a lot of wells too maintain production, Russia has the same problem with the Red Queen on the treadmill that the US has, although I don't buy into that model as much as many others do. But to some extant it’s an accurate analogy.

Back to options by the White House, about the only things yet to be tried which have nothing to do with production:

  • windfall profits tax;
  • curtail LNG and/or crude oil exports from the US.

I expect both. It's what their base expects.

See you later. 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.