So in the near term expect crude oil prices to descend to the level of future prices.
This column July 8, 2022
West Texas Intermediate traded as high as $104 last Friday. Thursday it traded as low as $92. And Friday was $97.54. A weekly close under $99 should turn the daily trend down.
As we write, President Biden is visiting Prince Salman. During his campaign he labeled Saudi Arabia a ‘pariah’ over its alleged involvement in the death of Jamal Khashoggi. Now Team Biden goes hat in hand begging for more oil to lower gasoline prices in the US. This is clearly on voters minds as gasoline prices soar to $5-6 as well as food prices.
As others in the energy industry have asked, why the trip to Saudi? Why not a trip to Tulsa, Midland, Bismarck, or even San Antonio with its Eagle Ford Shale? Let up on the regulations and the war on all things carbon based. The high cost of jet fuel has surely added to the chaos on display at world airports. It would be interesting to read the intelligence reports that Putin and Xi are surely getting over a President too indignant to use his own country’s resources. What does the President intend when he threatens to prohibit Iran from going nuclear while bribing them to do the opposite? The ramifications don’t stop there. The Euro currency has now dropped to parity against the US Dollar as the EU fears Putin will cut off natural gas supplies. This comes of course in the wake of Germany closing coal and nuclear plants. The message is simple. Trains, planes, and heavy trucks run on carbon fuels and they are needed. No magic wand will replace them with wind and solar over night. But don’t expect that reality to dawn on Team Biden.
Stocks sold off this week but managed to recover on a daily basis. Today it takes nine columns in the WSJ to list the new lows, so that is a low, expect stocks to rally for the time being.
The FED is rumored to raise rates perhaps a full point next week. Bond prices retreated the last two days. We will see what happens next week.
Finally gold and silver prices have swooned in what should be a developing low. Gold topped at $2,075 in March and now can be had for $1,705. Silver topped at $27.50 at the same time and has now plunged to $18.23. That is a 33% drop in four months. Prices of silver mining stocks are nearly as cheap as at the COVID low of March 2021. With world governments eyeing digital currencies, silver and gold are a problem and should soon see important lows.
