Publications: Notes at the Margin

No Rush to Buy Crude (October 7, 2024)

 

Dated Brent prices rose by more than ten percent over the last five days, spurred higher by the possibility of an Israeli attack on Iranian oil facilities. The rise led commentators to compare the boost to increases during past market disruptions. One foolish analyst even compared the market’s muted response to threats before last week to Aesop’s “boy who called wolf” fable “in which a shepherd lulls nearby villagers [into complacency] through repeated false alarms.”[i]

 

These critiques are wrong. The 2024 oil market is quite different from past markets in which disruptions panicked oil refiners into a frenzy of buying and hoarding. The recent price rise was not driven by spooked refiners but by those seeking to profit from the Middle East chaos, that is, speculators and the financial institutions that sold them “betting tickets” (call options).



[i] David Uberti, “Oil Surges After Biden Says U.S. Discussing Israel Attack on Iran Facilities,” The Wall Street Journal, October 3, 2024 [https://tinyurl.com/3jrp7zpk].

 

 

To receive the full report along with future issues of Notes at the Marginplease Contact Us or send us aInformation Request for subscription information.