Inflation Update: US Oil Production CRANKING – good news for headline inflation and risk of a rebound (nice to see global prices still sliding a result)
All,
It has not been getting the headlines it should be this is a great thing for the US and is starting to have an impact on OPEC, which has controlled the world for a VERY LONG time as it relates to energy.
This is a very important topic as it relates to rebounds in headline inflation and great news for the market as a whole. I have read several articles on this in last week and will continue to dive deeper this weekend because of how important this is to our industry and this country.
Very big win for the US when the oil companies are crushing it in daily production here.
This was on Seeking Alpha this morning, but there are other articles out there that can add to the talking points on why there are tailwinds here this time as the market comes down.
It is great to see OPEC skirmishing a bit not expecting the US to step up and solve the problem themselves the last two months and make the decision to produce at large numbers. We will have to wait and see if this is the work of great lawmakers at the state level, or, if this is the existing administration in Washington looking for a strong talking point come election time. Regardless who it is, this is very good for our business, the US, and overall inflation.
These are worth some quick reads.
https://www.axios.com/2023/12/05/us-oil-production-record
https://oilprice.com/Energy/Crude-Oil/US-Record-Breaking-Oil-Output-One-More-Blow-to-OPEC.html
Seeking Alpha:
Energy prices keep on slipping, with benchmark West Texas Intermediate (CL1:COM) so far down 22% in the fourth quarter and the average price of stateside gasoline falling 16% to $3.21 a gallon. It comes as the U.S. continues to pump crude at a record rate, cranking out a record 13.2M barrels a day, which is more than oil-exporting heavyweights Russia and Saudi Arabia. The developments have been a boon to the American consumer, as well as the Federal Reserve, which continues to receive much applause from the market for keeping inflation at bay.
Bigger picture: OPEC members have been forced to respond to record U.S. production, with tensions most apparent in the reactions from kingpin Saudi Arabia. So far the Kingdom’s strategy has been to slash more output, but the deeper cuts have not resonated with oil bulls and have even formed some cracks within the OPEC+ group. Economic weakness in China, Russia’s shadow fleet and the removal of fear premiums from the Israel-Hamas war have also helped contribute to oil’s decline, and the Saudis are hesitant to go nuclear by opening the taps, which would dent U.S. shale but cause it to lose many OPEC friends in the interim.
Many have also been eyeing recent developments to see whether the U.S. will refill the Strategic Petroleum Reserve, which has fallen to its lowest level since the 1980s following the release of 180M barrels last year. At the time, the Biden administration said it would consider refills “at or below about $67 to $72 per barrel,” but there have been opportunities that have been passed up when oil retook that range. WTI crude is now trading at around $71, and while the administration has been adding to the SPR, the buybacks have been limited to about 3M barrels per month given physical constraints in “the way the caverns are set up.”
The technicals: “The price of crude oil is likely to continue falling from current levels before settling at $70 at the major support,” writes SA analyst Damir Tokic. “Even though I agree with the bearish outlook, I would not recommend shorting crude oil – the geopolitical situation could change in a moment. In this situation, a long-put option strategy seems appropriate.”
Josh Erskine
Chief Executive Officer
CalCon Mutual Mortgage LLC dba OneTrust Home Loans
Yellowstone RE Holdings LLC
Yellowstone Global Investments LLC