I spent a lot of time thinking last night. My webinar came on the heels of yesterday’s disastrous market and oil price selloff and my analysis for my webinar’s subscribers centered around one question:
Was the sell-off in oil due to the new (old) OPEC deal negotiated on Sunday, or was it instead a function of the roiling reports of increased infections (mostly in the UK, but also here at home) of the Delta variant of Covid-19?
- If it was because of the deal, then oil’s downturn was likely going to be temporary: The 2m more barrels through the end of the year aren’t an ounce more than was promised BEFORE the UAE/Saudi rift earlier in the month. Those 2m barrels weren’t going to make a dent in the (likely 4.5m b/d) supply shortage that was on the horizon for a global economy in fast recovery from a global pandemic.
All of the banks agreed with me on this. Citigroup, Goldman, ANZ, Vanda – they were all with me.
- But, if it was about Delta….well then, there remained a question.
Was the resistance to the Covid vaccines worldwide enough to short-circuit the coming global economic recovery? Could the anti-vaxxers really be so widespread as to cause another pandemic lock-down? We know that more than 500 people are still dying of the Covid virus every day in this country, of which more than 98% haven’t been vaccinated. But what could this very contagious variant do inside of countries that have had far less success in vaccinating their citizens than we’ve had here in the US?
Particularly in the UK, worries are continuing to mount.
And if the global recovery goes off the rails, there’s one market that’s going to get annihilated first – OIL. Particularly after another 2m barrels a day have just been promised to it. That was why oil was off nearly $6 yesterday.
So, the answer I saw yesterday was that the deal wasn’t at fault – it was Covid – AGAIN.
At first, I was ready during my webinar to give everyone an enormous GREEN LIGHT. What an opportunity, I thought! This was just a temporary panic – there was NO WAY that the politicized anti-vaxxers would be dumb enough to get in the way of the recovery, could they? Would they really be willing to risk their own lives after it had been so clearly proven the powerful protections that the vaccines were providing, for both the original as well as the many variants from Covid, including Delta?
I was ready to list countless sold-off oil stocks that I figured were at bottom-picking prices, with bloated option premiums to boot.
Then, I stopped.
Was it the article I read on Jeremy Grantham last night that stopped me? Well, the great Grantham has been bearish (and wrong) on the markets for years now. His followers have missed the last ten thousand Dow points, at least. But there was one sentence that hit me hard and made me rethink my enthusiasm this morning:
“What pricks the bubble could be a virus problem, it could be an inflation problem, or it could be the most important category of all, which is everything else that is unexpected. One of 20 different things that you haven't even thought of will come out of the woodwork, and you had no idea it was even there. “
Of course, the unexpected – black swan type event.
Like a world so stupid that it’s willing to forego science and instead risk death. One that’s so polarized that nothing is merely true – like a miracle solution to a deadly disease being happily accepted by everyone.
I didn’t think it was possible. But of course, it is.
Steve Doocy exhorts anti-vax Fox viewers on-air yesterday to get the shot. “It will save your life”. Brian Kilmeade pushes back - “It’s their choice” if they want to risk living without it.
And in the middle of this, in the richest, most intelligent country in the world, we’re supposed to figure out whether we should buy oil stocks.
I thought I could, but I can’t. At least not this week.
I’ve got to wait a while – and see just how stupid humanity can be. I mean, Jeremy Grantham has been wrong for nearly a decade, but he’s got to be right sometime, doesn’t he?
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