high cards
market vibes
February 26…)
Heavy coverage of the US meeting with Iran that started around 3 AM in Geneva this morning is lending clarity to the crumbling oil curve in recent days.
The DOE reported the largest inventory build (16 mm bbls) in 3 years yesterday, almost all of it in PADD 3 (the Gulf Coast) where refinery utilization dropped to 88%. Total US inventories are now surging to a multi-year high of 435.8 million barrels.
Days of supply for crude oil are 27.3 (usually 24 to 25) and stocks to use for gasoline equal 30 days of supply. Distillates are 28 days. These are high numbers. KSA is considering lifting BPD in anticipation of a US strike and OPEC is considering another 137K bpd increase in April. Iran is ramping up exports in anticipation of an attack, China is waving it in at huge discounts.
What’s happening?
Trump is making it clear any attempt for specs to capitalize on a strike in Iran is going to be met with an oceanic wave of supply (gushing into PADD 3 now) intended to deny the Iranians and the specs another January 9, 1991 when Baker left a meeting with Tariq Aziz and told the press:“Regrettably, ladies and gentlemen, I heard nothing today that—in over six hours, I heard nothing that suggested to me any Iraqi flexibility whatsoever...”
Crude rallied 30% in 5 minutes. It has been the policy of governments to sell gold, support equities, and buffer market volatility during times of military action. FWIW… if you’re new to this stuff… it works.
in the markets
WTI is lower as the American team and the Iranians are meeting right now. I think it could be James Baker-Tariq Aziz type of meeting. “No nukes take it or leave it.” Trump has the cards. Oil may rally but it will be brief and when the shooting stops there is going to be an immense supply of oil in the market. If Iran blocks the Hormuz for spite all the OPEC nations and the world including Russia will turn on them…. WTI has been clinging to lows all morning but it’s a dangerous short here if our team comes out empty handed. Expect leaks.
