Haymaker Daily A Tale of Two Inventories
Hello, Haymakers:
Oil prices are once again retreating on the latest Iran War ceasefire news. This is despite repeated breakdowns of prior negotiations and an obvious unwillingness on the part of Iran's Islamic Revolutionary Guard Corps to relinquish their Strait of Hormuz chokehold.
Meanwhile, inventories continue to be drawn down globally, even in the U.S., which is largely self-reliant when it comes to crude output vs consumption. Per one of the world's foremost experts on the state of the oil market, John Kemp, America's petroleum supply is diminishing at an alarming rate.
Yet there's an additional inventory shortfall to which most investors appear oblivious. According to another influential authority on the oil market, Cornerstone Analytics, it's not just oil stocks that are being severely depleted. Refined-products inventories, like jet fuel and gasoline, are also experiencing dramatic drawdowns. The data on these stocks are much less easily obtained and, consequently, prone to being ignored… at least until airports and gas stations around the world start running short on fuel.
In our view, the latest retreat by oil prices to $76 is a compelling opportunity for investors who appreciate the severity of the current energy crisis. It is further encouraging that crude has retreated to its 200-day moving average, as shown by the yellow line in the following chart. For energy bulls, it's also heartening that the largest ETF of oil and gas producers made an all-time high earlier this year and has held very near that critical breakout point.
Year-to-Date Chart of West Texas Intermediate (WTI)
[Bloomberg chart — year-to-date WTI with the 200-day moving average marked in yellow]
Bloomberg
The Haymaker Team