Hot Oil, Cold Weather, Uncle Sam’s Green

Obviously, the prospects for more Uncle Sam payments are being traded as having the same effect as those prior transfers. The danger, therefore, lies on the gasoline chart (below) in between them; what happens when, not if, these payments run out? If it ends up being like last time, between summer and the end of last year, when the government stops paying the physical product stops moving (as much). Dependent upon the politics of stipends.

The assumption here, as well as many other markets, is that recovery shows up before this matters; or that recovery will show up because the US government somehow isn’t Japan. Increasingly priced for what seems perfection, though what about the dollar?

What we know from 2018 experience is that WTI can keep moving higher, like long-end UST yields, even as dollar problems (like those discussed yesterday) crop up and then proliferate negatively around the world. This seems to depend upon the extent of focus any potential Euro$ #5 might have on the domestic system; during Euro$ #4, oil prices wouldn’t succumb until October 2018’s landmine, and during Euro$ #3 it took about six months, too, before WTI plunged like long UST’s and CNY already had.

Thus, beyond the potential Euro$ #5 (assuming we really are out of #4), which is only just potential at the moment, there would also be complications arising from these other domestic factors where the physical fundamentals aren’t actually yet back to balance – it’s being presumed they’ll get there uninterrupted before anything else might go wrong.

And largely based upon Uncle Sam.

The government’s stipends have an impact, no doubt. Lasting impact? That really is another question.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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