evening wrap, march 5
market vibes
FUD on X is 10 to 1 against the US and Israel. Maybe more… Pointless to share it. Here’s a SITREP on the Strait and storage. I think it’s probably accurate. If it is, things won’t get crazy for at least 10 days. After that… things will get very crazy.
Saudi Arabia, UAE, Qatar, Kuwait, Iraq, etc. have clear, well-rehearsed strategies for managing production during a Strait of Hormuz closure. These plans were developed after the 1980s “Tanker War” and refined over decades. Just as Iran has been preparing for this war for 40 years, according to talking heads on TV so too, have the Gulf States. They have been skirmishing or fighting all out wars for years at a time with each other. They all have extensive intel assets and formidable military capabilities.
ALL producers hate shutting in wells. It risks reservoir damage, high restart costs, and lost revenue. They only do it when storage is full and all export options are exhausted. Iraq is already shutting in 300,000–500,000 bpd because it has no terminal pipelines and limited storage. Kuwait: Minor shut-ins, maybe 100,000 bpd. Qatar: Full force majeure on LNG production and cargoes since March 2.
Saudi & UAE: No significant shut-ins yet … bypass pipelines and storage are absorbing normal volume. Saudi and UAE have maintained their normal export levels so far. These two countries account for 60 % of Gulf OPEC 8 supply, so the region is not in total chaos yet and storage is more than adequate for 4–8 weeks at current rates. (Saudi alone has 300+ million barrels of commercial and SPR capacity).
in the markets
Silver is still decelerating open interest is still extremely low and the dominant point of control is $83.30… which is where prices have been settling for the last three days.
The wiggle I highlighted this morning didn’t have enough kinetic energy to launch on Thursday but prices are still above the reaction low (B). This a good example of the form stalling or possibly failing. I wouldn’t sell it or buy it. Just hodl and wait.
Gold has the lowest open interest in 7 years but the highest dollar value for open interest ever. So the long commitment is both high in value and low in ounces. The only thing that bothers me and keeps me unleveraged in gold and silver is the immense amount of collateral leverage everywhere else.
Not so much in gold because CME margins are relatively high and dynamic. Equity ETFs are 50%. However, when the shit is hitting the fan you don’t want safe assets, you want safe prices. I’m not sure these are safe prices. It should be moving but nothing is doing what it should be doing.
S&Ps traded indecisively again today.
