It’s no surprise the Russians have not done what they said they would do (cutting oil production).
Mizuho Securities
At the start of April the Saudis and the Russians announced a joint production cut. The market reacted by jumping four dollars above $80, leaving a four dollar gap on the chart. I turned bullish. That was a big mistake regarding oil. Thursday WTIC dropped as low as $63.57 but closed at $68.56.
Putin’s bad gamble on Ukraine has put the Russian economy in dire straits. The ruble is down in value, half his armored fleet is gone, and sanctions on his economy abound from the EU and the USA. The result according to the Wall Street Journal is, “pumping and exporting huge volumes of oil to support the beleaguered economy.” This has added to world supply when economies around the world are weakening. Recall our quote in a previous column that J.B. Hunt saw a “freight recession” looming.
Bell weather ExxonMobil dropped from $118 to $106 this month and bounce to $107 Friday. Likewise, Halliburton dropped from $35 to $29 and bounced to $30.
Still, driving season is but three or four weeks away. Gasoline prices typically rise then. I commented on the marketperspective.com blog crude could return to $66 and it happened much faster than I thought.
Russia is desperate, but do not expect Saudi to be a swing producer to allow for Putin’s expanded production. Natural gas prices do look like they are bottoming.
Meanwhile we have had three of the four largest bank collapses in the last two months. Silicon Valley, Signature, and First Republic were supposedly rescued by larger banks. Well when will Jerome and Janet run out of white knights to rescue their failure to supervise the banks they regulate? Pretty soon I would guess.
Other zombie banks include Pac West, First Horizon, Metropolitan, and Western Alliance. How bad is it? In early March Pac West PACW fell from $28 to $6. On Janet’s all clear assurance it popped back to $10. It currently trades at $6.
Most financial collapses, panics, bear markets sport early warning signs. The 2000-2002 collapse had the dot.coms. The 2007-2009 had Bear Stearns. These bank failures are a prelude to more serious problems ahead. We stated the stock markets topped between November 2021 and January 2022. The first collapse ended last summer or October. The counter trend rally to the upside is ending now. Even well regarded Frost CFR is down from $160 to $100 since last November.
The air pocket drops seen in bank stocks and the price of oil will soon spread to supposedly safe sectors, be prepared.
