Vandell
Co-Founder of Black Swan Capitalist, Crypto/Gold Macro
Crude oil's spike is a textbook transitory supply shock that turns deflationary once it runs its course. Historically such shocks drive inflation for just 2-3 CPI prints before the effects are absorbed and demand softens, much like the 2007 oil surge before the 2008 crisis and 2009 deflation, and the market has not fully priced this in. The labor market is clearly deteriorating, so a deflationary shift comes next and defensive positioning beats chasing highs. x.comÂ
Extreme bullishness about an oil shortage is a warning because oil has tended to return to around $50 within 12-18 months after such talk. Calls for a 'great oil repricing' appeared today, though they may not be widespread enough yet to mark the same setup. x.com x.comÂ
A ripping oil price is unlikely because the Fed needs to get through another month without a hike in September, since it can't afford one. The perverse CPI and PPI numbers already point that way. x.comÂ
Crude oil may need to reach $170 to rebalance, while markets are pricing only a short disruption. The IEA calls this the largest supply disruption in the history of the oil market, and Strait of Hormuz shipping has collapsed over 70%. The wider risk is that the Gulf relies on 56 desalination plants for 90% of its water and on imported food; both sides have struck desalination plants, and urea prices are up 20% as a quarter of nitrogen fertilizer trade transits the same chokepoint. x.comÂ
Crude oil should keep moving lower even after the midterms, because 2027 economic projections point to lower inflation. Around $100, oil was a good short since policymakers wouldn't let it break out ahead of the midterms and risk voter confidence. Some volatility is likely at first. x.comÂ
Oil's spike to $105 looks like a fear spike, not a structural repricing, as the futures curve shows. The market itself expects oil back in the low $80s by year-end. Oil and the S&P 500 rising together for the first time this year is only a one-day correlation break, not yet a regime change. x.comÂ
Crude oil should rise if the Federal Reserve raises rates next week, because a hike would send the stock market crashing. PPI came in line with expectations, leaving that game plan unchanged, and markets now price a 62% chance that Kevin Warsh's Fed hikes. x.comÂ
Breakeven inflation rates suggest that crude oil is heading lower. x.comÂ
Crude oil looks set to punish late buyers. Sentiment feels like maximum pain for oil shorts, so the trade is to take the other side of it. x.com x.comÂ
Crude oil stays elevated as long as there is no deal with Iran, feeding a vicious cycle in which higher oil keeps inflation sticky and pushes rates higher, breaking the bond market. To bring yields down, Trump must either convince the market oil flows are normal or end the war. x.comÂ
Crude oil looks set for a pullback because energy is more overbought than 95% of sessions in two years while market stress is deteriorating. Defense and drone sectors that rallied on the same geopolitical thesis are already breaking down. IEA members are releasing a record 400 million barrels of emergency reserves, and $1M of put spreads target a roughly 10% drop by mid-April. Oil also trades outside its Monte Carlo probability cone, though 8 of 9 models still say bullish. x.com x.com x.com … Show more
