E Market Briefing For Friday, March 10

Swelling crude oil inventories certainly contribute to the majority of fears about economic slowing and of course the XOI’s influence on the market big caps. But it’s not that simple. First on Oil; it’s been rising supply rather than slackening demand, that contributes to that aspect.

Even the Saudi’s in a clear-cut comment yesterday (that really accelerated the Oil decline) lambasted the Americans (how dare we, right) for increasing ‘Shale Oil’ exploration quickly, which hurts their plans to use any tactic they can, to hobble our Petroleum Industry as much as they’d like. Oilmen aren’t in a ‘cartel’ here, and they are a feisty entrepreneurial bunch; pretty much sticking it to the Saudis or OPEC just as quickly as reasonable price allows.
 

This highlights why I’ve often said the American consumer (and the naive in media who cherish low gasoline prices every time they arrive ‘as if’ that’s a good thing) should fear what they wish for; since allowing our Oil industry to be hobbled, is exactly how we got high retail fuel prices years ago in the first place, when the Energy Crisis was thrust upon us as OPEC declared ‘war’, in a time when Washington advised sweaters and resetting thermostats, not a head-on confrontation by simply refusing to buy Oil from them, even if for a time we had to issue WW2 style ration coupons. (We also did at a point.)

It was another example of weak leadership that valued comfort; not putting a cartel in its rightful place. Today North America (all 3 countries) basically are self-sufficient; so strong leadership could tell OPEC to ‘go fish’, more or less, and rely on slipping-demand from China and India to buy their Oil.

For us this pattern isn’t long-lasting; as already you have traders who were urging buying (we observed both high inventories and a struggling technical pattern that could have broken higher but did not) but now flip-flopped to call for 40 or even 30 oil, which pretty much ensures you are unlikely to see that especially with gearing-up for the Summer driving season coming shortly.