There is a Huge Disconnect Between Energy Credit and Equity
Oil prices have swung drastically over the last couple months. The market was unprepared for the US to grant waivers amounting to nearly one million barrels/day to fill the void expected to be left by the drop in Iranian exports. Instead of Iranian exports plunging to almost zero by November, they have been allowed a more shallow glide path. This has thrown the oil market off-balance by about one million barrels/day.
Especially strange is the fact that the US asked Saudi Arabia to pump another approximately one million barrels/day earlier in the year, and the Kingdom has delivered, taking OPEC’s production up by one million barrels/day since June. Yesterday, Saudi Arabia floated the idea of trimming OPEC’s production by one million barrels/day by December.
Adding to the oddities in the energy market is the nose-dive in US exports of petroleum products to China. Similar to disruptions seen in the soybean market, this seems to have a geopolitical undertone.