From OPEC+ Lollipops to Market Haircuts: Navigating the Turbulent Waters of Oil Prices and Economic Signals
We could be going from the OPEC+ lollipop to a bad haircut. Oil prices suffered their greatest weekly loss in three months as concerns about stalled economic growth became more prominent. Compounding this concern was a large build in inventories combined with increasing US crude production. The EIA reported a 4% drop in gasoline demand year over year. We all know what happens when supply exceeds demand. Can you say…contango? Get ready to put The Tank Tiger on speed dial. Brent crude futures for July ended the week at $82.96 a barrel. WTI crude finished at $78.11 a barrel – dropping 7% for the week. Meanwhile, OPEC+ is set to hold its next ministerial meeting on June 1 in Vienna. It’s likely they won’t increase pumping without assuredness of a demand increase. Well…we will see. They also hate to lose market share.
While the oil bulls were napping, US economic data for the past month also seems to be tapping the brakes. The nation’s employers added 175,000 jobs last month, down sharply from the ginormous increase of 315,000 in March. The jobless rate rose to 3.9 percent from 3.8 percent. Growth is slowing but inflation has not yet tempered. The econ Chicken Littles are now running around screaming stagflation, suggesting that we’re back in the 70’s and Jimmy Carter. While all of this was going on, the stock market was watching the fella over there with the hella good hair and decided to shake it off. You see, the forward thinking stock market is playing chess, while the rest of the world is playing checkers. The demand for labor is slowing, which will eventually ease inflation pressures, which provides the Fed with a green light to cut rates later this year. I see, said the blind man.
Back in 2012, Sunoco’s demise was deemed a “Gothic tale” after going through a period of self-liquidation which almost transitioned into immolation. However, fast forward 12 years. Last week, Sunoco announced the completion of the acquisition of NuStar. After the acquisition, Sunoco’s midstream operations now include an extensive network of approximately 9,500 miles of pipeline and over 100 terminals. It is a most impressive story of redemption. It’s exciting for the industry to see these midstream assets under the umbrella of an organization that is all for nurturing organic growth. Pat’s Cheesesteaks for all my friends, we’ll take ours wiz wit.
