A bearish conviction on black gold

Matein Khalid

It’s no coincidence that the yield on the ten yr US Treasury word plunged 60 foundation factors to its present 4.34% and the US Greenback index slumped to 103.40 as successive benign October inflation knowledge and dovish central banker feedback has led to a pivot in Wall Road rate of interest expectations, with the consensus now projecting two charge cuts on the March and Could 2024 FOMC conclaves. This macro shift was predictably excessive octane gasoline for the mom of all bull runs in Wall Road danger belongings, led by Huge Tech shares on Nasdaq in November.

The traditional Persian proverb that “it’s all the time darkest earlier than daybreak” was proved with a vengeance in Inexperienced November when the S&P 500 index rose 9% and the Nasdaq Comp was up a stellar 11% after a dismal efficiency within the 3Q whose reminiscence shall be eternally tarnished by the Israel/Gaza blood letting that has horrified the world. Like Sherlock Holmes’ canine that didn’t bark, the inventory market’s frenzied rally was amplified by the reversal of the geopolitical danger premium in crude oil costs when the Gaza warfare didn’t escalate right into a full fledge IDF/Hezbollah missile duel over Lebanon not to mention a army confrontation between the US and Iran that might have posed a risk to tanker visitors throughout vitality choke factors just like the Straits of Hormuz.

Au contraire, Brent crude has fallen from $96 simply after the October seventh Hamas terrorist assault to barely $80 now as Angola has overtly threatened to violate its OPEC quota and the oil markets are skeptical that their 900,000 barrels output reduce introduced by the oil ministers is solely not practical with present tanker/cargo/pipeline knowledge. With US shale oil output now at an astonishing 13.25 MBD, Venezuela set to exponentially increase manufacturing within the Maracaibo Basin, Petrobras ramping up drilling in offshore Brazil and the Amazon Basin, Iranian output above 3.2 MBD regardless of US sanctions, Exxon/Pioneer and Chevron/Hess mergers a $110 billion wager on increased US shale/Gulf of Mexico output, my bearish conviction on black gold is being vindicated within the oil futures markets of Asia as I write.

The largest danger within the US inventory market this yr was not being totally invested in it as my associates who took my name to purchase Nvidia in January 2023 at 150 can attest. But the S&P 500 index can be up 19% in 2023 with the Nasdaq up 40% and Nvidia up a white scorching 240%. Ooh, child, ooh…

The cliche that if it walks like a duck and quacks like a duck doesn’t essentially all the time maintain true within the monetary markets however it does appear that the market efficiency of 2023 quacks like a secular bull market, though its ballast was supplied by the Huge Tech megacap Magazine Seven ex-Tesla. Jay Powell won’t intestine the bullish zeitgeist although he could warn in opposition to “irrational exuberance” on Wall Road to offset if it threatens the nuances or timing of financial coverage and his disinflation agenda. As a airplane passenger, I simply pray for a touchdown, not to mention a mushy touchdown. Ditto for Mr. Market in 2024.

Additionally printed on Medium.