Publications: Notes at the Margin

Rose-Colored Glasses Removed II (June 22, 2020)

 

The global economy may have bottomed, and recovery may have begun. Oil use is starting to increase, as well. However, the rise will be slow. Economic forecasters are pessimistic. The pandemic’s resurgence, the stimulus ending in the United States, and other developments point to a gradual comeback. Indeed, crude and product prices have likely reached unstainable levels, given the prospect of a slow and irregular economic revival. Much of the climb in product prices can be tied to the return of oil prices to the thirties, a boost that enabled the financial institutions writing puts to producers to buy back shorts in the futures market.

 

Oil and equity traders are enjoying the oil market equivalent of the high associated with morphine or other drugs given after surgery that suppress pain and create euphoria. In reality, the trend in oil consumption over the next year or two looks relatively bleak despite the modestly good news on the US economy.

 

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