While the trend cannot be said to have reversed there are positive signs of ExxonMobil and Chevron trying to put in a bottom. The same can be said for ConocoPhillips and Apache.
This column last week
West Texas Intermediate spent a couple of days below $70 last week. It has now recovered to $73.54. This takes it to the top of a trend channel but not quite to the break out point. Team Biden still refuses to pick up the phone to Tulsa and Midland. He could suggest it would be a good time to become energy independent again.
Instead he worked a prisoner exchange deal with Venezuela. Maduro is returning ‘Fat Leonard’ aka Leonard Francis involved in a U.S. Navy corruption scheme. After going out of his way to announce he would make Prince Salman of Saudi Arabia a pariah, Biden has begged for lower prices. Instead the Saudis and Russia cut production. But there is more.
The Shia branch of Islam constitutes 10-15% of the Muslim world. The Houthi in Yemen, Hezbollah in Lebanon are Shia as well as their proxy sponsor Iran. Sunnis represent some 85% of the Islam world. These groups include Syria, Hamas in Gaza, and Saudi Arabia.
If you do not have a map of the Mid-East on hand, get one, you will be consulting it in the near future. Yemen lays on the east coast of the Red Sea which reaches to the Suez Canal to the north. The Houthis have been launching rockets and drones at shipping headed for Suez. This has caused Defense Secretary Lloyd Austin to warn the Houthis to cease and desist. But given Biden’s hesitant support of Ukraine, and fear of angering Russia or Hamas, who is afraid of the U.S.? And with a reduced Navy down from about 575 ships under Reagan to less than 300 now, well that does not send a message of strength. The reality is that ships are now diverting the much longer route around Cape Town South Africa. This extends the time for a round trip Singapore to Rotterdam from 34 to 43 days. The wonder is that oil is not already higher.
Stock prices have been on a tear and social mood as well as actual stock ownership has never been higher. After a breather Wednesday, prices were back up Thursday. I expect new highs this month.
Interest rates have fallen from 5% on the ten-year note to about 4%. I think our target of 3.5% for that note is realistic, then rates resume higher. This will eventually be a re-play of the 1970s with rates stair stepping higher. Short rates however, three-month T bills, remain at 5% or higher.
