Being the naive man I am I bought a little bit of xle, energy etf that is very correlated with oil prices. With the strait technically closed and the Iran war still on going I would think pieces would keep going up yet they have been coming down the last week. Is this some market manipulation? From what I understand current oil prices, spot prices I believe are over a $100 and rising yet future prices are sort of still. Even though oil production facilities have been wrecked in the GCC and Iran and with certain countries already out of oil or rationing. Are we simply waiting for a pop when the ceasefire is over or is are 5he markers being rigged and not reflecting the actual price of oil and future oil prices? Thought I could hedge a little bit and cover my increases gas cost for the coming year guess I was wrong. Appreciate an explanation on what the hell is going on.
Explain like I'm five is there an oil supply issue or not, Brent crude oil prices keeps going down as of a few days ago but war isn't over?
byu/wishihadaps42 inoil
Posted by wishihadaps42
9 Comments
Think the market still somehow believes there will be a resolution of this situation in the near term. That seems more and more unlikely each day and imho eventually there will be a dramatic repricing of futures. That said, it’s the old can you stay solvent as long as the market stays irrational?
There is definitely market manipulation on the price of oil. Some speculation that the US may implement a gas tax on profits, peace talks, and the slight possibility that the US may halt oil exports may be a driver on xle drop. Hard to say, I’m holding that too.
oil will rise in the long run even if peace happens tomorrow. the disruption to the supply chain is too great with thousands of tankers rerouted, you’re talking 2 month round trip with out even factoring in backlogs for a berth. now factor in so much physical damage that will take years to fix? chefs kiss. I doubt we see under 100/bbl again until 2035. when will the price become rational? Who knows. manipulation? probably.
yes, obviously, 40% of the middle east’s oil production has been destroyed, duh
>Explain like I’m five is there an oil supply issue or not
Like you’re five? OK…. but remember, you asked for it.
*Yes, sweetie, we do have an oil supply issue. Hold your hand up. That’s it. Now how many fingers are you holding up? That’s right, five. Good job.*
*Now let’s pretend your thumb is oil that travels through the strait. Fold your thumb in, that’s it. Now, how many fingers are you holding up? That’s right four. That’s less than five which we had before and that’s the oil supply we needed to keep costs where they were.*
*Why aren’t the markets pricing accordingly? That’s a* ***very*** *good question darling. Tell you what, why don’t you go ask your mother and, while you’re at it, ask her where babies come from. I wonder which question she’ll give you an answer for…*
Only Iranian ports are blocked
OK.
Let’s say you are a pizza delivery driver.
An order comes for 5 pizzas.
You get to the pizza store and they only have 4 pizzas
On the way from the store to your car a person stops you and tells you they have an extra pizza that you can have for free.
You tell him thanks grab that pizza BOX and now according to you, you have 5 pizzas.
You get to the house to deliver the pizzas. You hand the pizza boxes over.
As the people that ordered the pizza check the boxes, they notice that 1 pizza box doesn’t have a pizza.
Now they are angry and call the store to have them send another pizza.
The pizza store tells them that they have no more pizzas for the original price they paid. Now they have to pay double.
Customer is very angry and doesn’t want to wait for another hour for a pizza so he buys some pizza from the other 4 boxes.
Now everyone has less pizza and pizza is more expensive.
The futures market = delivery guy
The pizza store = the world oil supply
The missing pizza = the supply choke in the strait of hormuz
The shady guy that gave you an empty pizza = the US government.
Oil regresses to the mean 100% of the time and usually in quick order. This is because literally everyone wants oil to be well below this peak price. But you see oil like gold, or silver. it isn’t. it’s an input to a bigger economy that no one wants to pay more for. You’re fighting everyone.
Market manipulation. Word of the day.