- The Oil Counter-narrative
- The Worst Trade I Ever Made in My Life
- Here's the Secret to Timing Your Oil Trades Perfectly
- Watch Out: The Lawyers and Lizards Just Might Win This Thing
- The Smartest Move I Ever Made in the Oil Markets Was Walking Out on These Two Guys…
- This Isn't Hard: Buy Metals... Lots of 'Em... Everything You Can Get Your Hands On
- UN Head Honcho to Investors: "Do as I Say, Not as I Do"
- Postcards: We’re Entering an Oil Boom Unlike Any Other – Here’s What to Do About It
- Postcards: Our Permian Idea Is About to Get Very Profitable No Matter What Oil Does
- What T. Boone Pickens Taught Me About Investing in Commodities
- Oil Is Heading Higher – Here’s What to Do (Plus: A Special Interview)
- The Oil Sector Is Getting Ahead of Itself - Here's How to Profit
- What to Do After the Greatest Collapse in Any Commodity Ever
- Reality Gap of the Week
- We're in Uncharted Territory for Oil
- Don't Miss This "Triple Play" Opportunity to Profit from Oil's Rebound
I’d first met Boone in part because I had mocked Peak Oil as yet another nonsense Malthusian fantasy.At a 2014 Stansberry Research Conference event in Dallas, T.Boone conceded that he’d been dead wrong about Peak Oil.
Garrett Baldwin explains why he's still bullish on oil, and why he believes going long on it is a good bet.
It feels like 10 years ago, but it's really only been about seven weeks since that fateful April 20, when a COVID-19-driven collapse in demand pummeled West Texas Intermediate crude oil futures. Prices hit the floor, fell through it, and landed in negative territory at -$37.63 a barrel.
In those seven weeks, WTI has rocketed almost 200%. The S&P Oil & Gas Exploration and Production Select Industry Index has risen nearly 70%, though it's still down more than 24% for the year.
Over the past few days, though, oil benchmarks have been creeping 2% and 3% lower, which in my experience is a big, neon sign saying "Selling Ahead." And several marquee energy stocks like Occidental Petroleum Corp. and Halliburton Co. are also flashing sell-off warnings.
This reminds me of the old Road Runner and Wile E. Coyote Looney Tunes cartoons - remember them? One of the (many) cheesy running gags had Wile chasing Road Runner only to overshoot him at a cliff. Wile would hang there in midair for a second, have a "Maalox moment," and then drop.
That's not all that different than what's happening in crude right now. Both the commodity and most of its associated stocks entered what market technicians like me call "overbought" territory. Now they're dropping like rocks. Investors are starting to figure out if they're in over their heads.
How do I know? The answer is worth exploring because it can make you a sharper trader. There's one simple, small number you can look at in any stock chart that can tell you instantly how to play it.
What happened to oil yesterday was the greatest collapse I've ever seen in any commodity, ever.
And barring some unforeseen apocalypse, we'll never see it again.
This just doesn't happen in the commodities market. Every once in a while in a stock, sure, you'll get a case of fraud or someone goes bankrupt. The stock will go to $0 over time.
In the commodities world, there's a bottom for prices. This doesn't happen. Until it did.
Oil futures traded at a negative price for the first time in history.
We had the perfect storm for an oil collapse.
Demand is down. No one is traveling, and global manufacturing has plummeted.
There's a price war. Saudi Arabia drove production way up, and Russia joined them. Now there's estimates of up to 30 million barrels a day of extra oil being produced. Even with a production cut, there will be 20 million barrels a day being produced with nowhere to go.
All that oil needs to be stored somewhere, and world is running out of places to put it.
Futures contracts are tied to physical delivery of a commodity. Everyone dumped them because they have nowhere to put that oil.
No one wants oil right now.
And that's why this oil story is so troubling - it's very much a demand story, not an oversupply story...
What to Do When No One Wants Oil
An oil trading firm in Singapore, Hin Leong, kicked off oil's trouble. Hin Leong buys and sells large super tankers filled with physical oil to distribute through Asia.
The OPEC oil cartel and other oil-producing countries, mainly Russia, spent most of last week hashing out a deal to cut oil production and put an end to oil's 60% price drop.
Under the so-called OPEC+ umbrella, the group finally agreed to a deal over the weekend.
Oil futures shot up, but fell back before trading Monday.
Oil opened up, but then fell.
That's because there's a huge Reality Gap between what the oil deal needed to do, and what it actually entails.
The meeting in Vienna last week among OPEC members and their non-OPEC allies, OPEC plus, was intended to help nations reach an agreement on production cuts to extend past the current end date of April 1.
The concern is the spread of the coronavirus will drive down the price further as global economic demand slows. But Russia was not on board. And the Saudis' response to Russia's stance was to cut its price to Chinese customers, and plan to increase production by as much as 2 million barrels per day. That fallout then led to oil's massive 30% nosedive. And on Monday, oil's decline was literal fuel to the stock market fire, causing it to fall 7.79% in one day. Since Monday's losses, both oil and the stock market have recovered a bit. Oil is sitting at around $33 a barrel and stocks rallied at open.
But unless there's a resolution, we will be retesting the market lows that we experienced in 2015 and 2016, when oil dipped below $30 per barrel and we'll see a ripple effect through the economy that's going to have a parallel impact to the COVID-19 problems we already have. Here's Kent with the details...