ELAM: Oil prices retreat

Crude oil prices, West Texas Intermediate (WTIC) have dropped 6.3% in the last five days.

— Barchart.com

The oil price rally evaporated even faster than it began. Tuesday, April 30, I posted a sell recommendation on my investing blog for all stocks other than Transocean. At that point the issues all had profits. Transocean (RIG) experienced a dramatic decline below $5.25. It had recovered to $5.55 today (Friday). I have found no reason for this as RIG has $8 billion of future sales already booked.

Today’s crude range is $78.25 to $79.63. It is trading at $78.51 mid-day Friday, the lower end of the range. It is still possible that price is re-testing the breakout level of $78-80. And the rally could resume. For example, should Russia and the Saudis throttle back on production, prices would likely resume an upward trend.

Iran’s oil exports hit a six-year high last month. Iran exports 1.56 million barrels a day, mostly to China. This has brought the Mullahs $100 billion dollars since Team Biden took office. Trump enacted sanctions in 2018 which slowed Iran’s exports but Biden is doing nothing to enforce them now.

However, Biden is slowing American production. He put millions of acres in Alaska off limits to drilling. The Interior Department says it will take another 18 months to prepare for the next Gulf of Mexico lease sale. That extends the lease sale to nearly 2026. Meanwhile Biden negotiates with Maduro’s failed regime in Venezuela for oil exports. Team Biden seems determined to make America energy dependent on the most dangerous parts of the world once again.

The stock market is rallying today. The Dow Industrials have advanced about 1% while the tech heavy NASD 100 is up about 2%. Bear markets experience sudden rallies like this which convince the majority stocks are still in a a bull market.

The three-month Treasury bill still yields a safe 5.25%. This outpaces the ten-year note trading at 4.5%. The yield curve remains inverted with short duration debt yielding more than longer maturities. Historically this has predicted a recession. My opinion remains that we are headed for a repeat of 1973-74 which saw a 50% drop in the stock market.

Another feature of that 1968-74 era were student protests, then over the draft during the Viet Nam war. Protests, sit-ins, and building occupations are all back with vigor on college campuses. Parents shelling out $90K per year for fancy Ivy League colleges are unhappy over cancelled in-person classes. Some parents are asking for tuition refunds. Not a week goes by that I do not see an article about business and students seeking alternatives to expensive college debt. All these ‘encampments’ shown on television are not helping make the case for college. Just today Trump pulled ahead of Biden by 10 points in a Rasmussen poll. Biden tries to cater to both protesting sides on the Hamas war, and it is not working.