Retail investors are rising up. Refusing to be Wall Street’s doormats, retail investors are attacking Wall Street positions that are vulnerable and making them pay. They are banding together and rocking the markets, squeezing stocks like Game Stop (GME) and AMC (AMC), and are now turning their attention to silver. They are attacking short-sellers and they are now realizing that silver is undervalued as compared to gold and Bitcoin. It will be only a matter of time till they realize that oil is cheap as well.

Image Source: Pixabay

Bloomberg News reports that “the precious metal has become a popular buying target for retail investors who want to inflict losses on hedge funds, after posts on WallStreetBets claimed the market was ripe for a short squeeze. Others in the Reddit forum have responded with pleas to avoid the trade, saying Citadel stands to benefit as a major holder of the largest silver exchange-traded fund.” But they are not listening. Silver coins are flying off the shelf and silver futures soared above $30.00 a once.

The run-on silver and the risk on-momentum is boosting oil! It may be only a period before the rental army starts to realize that President Joe Biden's attack on oil is going to leave the market undersupplied. Retail investors might rely on the fact that banks are pulling their investment dollars away from fossil fuels and might become a target by the crew that wants banks to feel some investment pain.

Oil prices were weak Friday on Covid fears and what seems to be disarray in the Biden administration as far as vaccine distribution goes. Politico reports “It’s a mess": Biden’s first 10 days dominated by vaccine mysteries. Biden’s team is still trying to locate upwards of 20 million vaccine doses that have been sent to states — a mystery that has hampered plans to speed up the national vaccination effort. Joe promised he would bring in a competent, tested team to run the pandemic response, set ambitious vaccination targets and impose strict public health guidelines. His team arrived at the White House with a 200-page response plan ready to roll out. But instead, they have spent much of the last week trying to wrap their hands around the mushrooming crisis — a process officials acknowledge has been humbling and triggered a concerted effort to temper expectations about how quickly they might get the nation back to normal.

Reports that OPEC compliance to production cuts is improving. Bloomberg News reported OPEC and its partners estimate they implemented 99% of their agreed oil-supply curbs in December, according to a delegate who asked not to be named. Implementation in December was at 103% among OPEC members, and 93% for their non-OPEC partners, a group that includes Russia and Kazakhstan.  

Can Big Oil be Big again? Big oil has shrunk but a major merger could signal a longer-term bottom in oil despite Biden's desire to transition away from oil. The Wall Street Journal reports that, “The chief executives of Exxon Mobil Corp. XOM -2.65% and Chevron Corp. CVX -4.29% spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever.

Chevron Chief Executive Mike Wirth and Exxon CEO Darren Woods discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put an enormous financial strain on both companies, the people said. The discussions were described as preliminary and are not ongoing but could come back in the future, the people said.  The Journal writes, "Such a deal would reunite the two largest descendants of John D. Rockefeller’s Standard Oil monopoly, which was broken up by U.S. regulators in 1911, and reshape the oil industry.  A combined company’s market value could top $350 billion. Exxon has a market value of $190 billion, while Chevron’s is $164 billion. Together, they would likely form the world’s second-largest oil company by market capitalization and production, producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels, second only in both measures to Saudi Aramco.

But a merger of the two largest American oil companies could encounter regulatory and antitrust challenges under the Biden administration. Biden has said climate change is one of the biggest crises the country faces. In October he said he would push the country to “transition away from the oil industry.” He has not been as vocal about antitrust matters, and the administration has yet to nominate the Justice Department’s head of that division. Stay tuned!

We still are recommending staying hedged. The upside risks to oil and products are rising. We should see big inventory draws in the coming weeks. Oil demand is rising. We could see the impact from shale oil producer restraint. On top of that, the anti-petroleum policies of the Biden administration will restrict U.S. output and allow OPEC and Russia to be the biggest known influence on price.