Thanks Peter - another article meeting the timely what's top of our minds topics! How does our US govt use of (or need to replinish) our oil reserves (is there a law or mandate about how and when we replinish?) Play here?
Releases from the Strategic Petroleum Reserve invariably have depressed the price of oil, and the decision not to replenish the SPR removed a potential price support (there is a suspicion among some analysts that this was the catalyzed event that triggered the OPEC+ cuts on April 2).
However, as SPR replenishment is not part of normal demand, the best case scenario that replenishment would have provided is price stabilization.
With declining prices in the face of production cuts, we are potentially looking at a scenario where deflation takes hold in the global economy.
You are zeroed in on broad strokes like deflation and risks of deep economic slowdown - as aside why wouldn't US be a buyer now to restock the SPR given the low price? Could they expect price to go much lower?
Thanks Peter - another article meeting the timely what's top of our minds topics! How does our US govt use of (or need to replinish) our oil reserves (is there a law or mandate about how and when we replinish?) Play here?
Releases from the Strategic Petroleum Reserve invariably have depressed the price of oil, and the decision not to replenish the SPR removed a potential price support (there is a suspicion among some analysts that this was the catalyzed event that triggered the OPEC+ cuts on April 2).
However, as SPR replenishment is not part of normal demand, the best case scenario that replenishment would have provided is price stabilization.
With declining prices in the face of production cuts, we are potentially looking at a scenario where deflation takes hold in the global economy.
You are zeroed in on broad strokes like deflation and risks of deep economic slowdown - as aside why wouldn't US be a buyer now to restock the SPR given the low price? Could they expect price to go much lower?
Expecting the price to go much lower by implication suggests an awareness that global deflation is happening.
However, not propping up oil prices now also maximizes downward pressure in Russian oil--an obvious geopolitical plus for Washington DC.
I suspect there is less appreciation for the economic situation and more appreciation for the geopolitical situation.
Thank you, with a nod to seasonal changes, I've been perplexed watching XLE sink.
"I could stand $1.68 a gallon and a mean tweet."
-John Rich
The reality is the price of gas would have gone up even had Trump been reelected.
Once the lockdowns happened, that was inevitable.