The Mother-Of-All Oil Wars ๐Ÿ›ข

Table of Contents

The Mother-Of-All Oil Wars

Did Russia just crash the stock market? Or was it Saudi King Salman? The Federal Reserve? Perhaps Wall Street all along? Pandemonium has erupted in financial markets following the breakdown of the worldโ€™s oil cartel. Monday blues!

As a legal cartel, the Organisation of Petroleum Exporting Countries (OPEC) is supposed to be united. Itโ€™s supposed to take heed of the world’s demand for oil, negotiate drilling, prevent oversupply and undersupply, and keep prices per barrel stable. But that all went out the window on Friday.

Russia vetoed curbs to production, despite the coronavirus panic. Itโ€™s going to hike production instead. Itโ€™s going to flood the market with oil, and itโ€™s going to plunge oil prices as a result.

This is not about market stability. Itโ€™s a thrust for market share; a torpedo sent the way of competing shale companies belonging to other kleptocracies in the OPEC group.

To protect its trillion-dollar stock market freshman, Saudi Aramco, kingpin producer Saudi Arabia will also open up the taps. That makes it an all-out price war between the heavyweights!

Itโ€™s worth remembering that airlines are drastically cutting capacity right now and not fueling as many planes amid COVID-19. Manufacturers are winding down their production lines as consumers stay at home, and freight transporters have fewer goods to ship. The oversupply is about to be mind-boggling!

West Texas Intermediate and Brent Crude prices crashed 31% at the market open, the most since the Gulf war. The Invstr community massively short-sold oil overnight by a margin of 20%, Japanese stocks tanked 7%, European stocks, 6%, the entire yield curve for US Treasury bonds went sub-1%, and futures on the S&P 500 dived so far that trading was stopped. Don’t panic. Keep notes of others’ behaviour and use this as an opportunity to learn about stock market animal spirits!

Cheaper gas at the pump could prove a massive setback to the clean energy movement, including Teslaโ€™s electric vehicle push. Exxon and Chevron are under siege, โ€˜upstreamโ€™ shale players in the business of selling the oil they drill at market prices. Those stocks will fall hard, whereas refiners like Tesoro and Valero should do better as net buyers of the sticky stuff.

If you’re feeling lost, just think of this price war like a competition for holding breathe underwater. It canโ€™t go on forever, or everyone will drown. Itโ€™s simply not commercially viable to keep oil prices this low. After a few players run out of air, the others will decide they’re the winners and that they can go on no longer. Production will be reeled in, and oil prices will self-correct. The problem is the interim damage. Investors arenโ€™t just at risk of drowning here. Thereโ€™s a pathogen on the loose!

Share:
More Posts
The Crude Oil Bust ๐Ÿ›ข

Surging global crude oil prices, driven by factors like OPEC+ production cuts have pushed U.S. West Texas Intermediate futures to over $95 per barrel.

Metaverse Returns ๐Ÿค–

Meta, led by CEO Mark Zuckerberg, is intensifying its commitment to innovation in the Metaverse through the introduction of the Quest 3 VR headset.

Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visaยฎ Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community. The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results. Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such. Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.