Friday Haymaker
Peak Cheap Oil - Drilling Deeper
“Presently, (oil) inventories are in line with the five-year average. Including the [Strategic Petroleum Reserve], inventories are 300 million barrels below five-year averages—a record deficit. Global inventories are just as tight.” -Goehring & Rozencwajg
Charts of the Week
For those of you who watched my short video earlier today on major breakouts in the S&P and the NASDAQ, as well as on certain energy and insurance stocks, I pointed out a few others, as well. Those involve upside “range expansions” on credit card and auto loan delinquencies. Suffice to say these are at odds with ebullient market conditions. Chalk this up to yet more examples of The Great Disconnect, the striking contrast between market action and economic fundamentals.
Green Line: Auto Delinquencies; Blue Line: Credit Card Delinquencies - (Click chart to expand)
There is considerable commentary currently that markets are not in a 2021-type mania. However, when looking at flows into cryptos it’s hard to not to use the “B” word, as in bubble. Upward momentum for both cryptos and tech stocks remains powerful, but history is clear these events don’t go gently into the night once the fever breaks.
The Peak Cheap Oil Debate: We’re Gonna Need a Deeper Drill
What the heck is SPRIEADUC? What language is that, anyway? Okay, it’s my feeble attempt to come up with something along the lines of NIMBY. Like I said, feeble, but actually the NIMBY comparison has some relevance, as I will mention toward the end of this note.
In my opinion, no analysis of the global oil markets is possible without considering the three initialisms I’ve bizarrely linked together: SPR, IEA, and DUC. Respectively, they stand for: 1) Strategic Petroleum Reserve, 2) International Energy Agency, and 3) Drilled, Uncompleted; again, there will be more elaboration to follow.
The February 16th Haymaker on the Peak Cheap Oil debate touched on these but, in the interest of time and space, only briefly. As many of you are aware, my friend the widely read Doomberg, has dramatically turned up the flames on this heated opinion exchange. In the process, he has taken a stance very different from mine. It’s also contrary to two of the specialized energy research firms I greatly respect: Cornerstone Analytics, and Goehring & Rozencwajg.
Of course, it’s human nature to admire sources that agree with you, and I’m no less guilty of that than the next pundit. But I do believe it’s a major omission of critical information not to consider all three of these initialisms. Unfortunately, those with a bearish, or even neutralish, view of energy, the latter of which I think applies to Doomberg, all too often ignore these three considerations.
First up, the SPR.