The Established Slowdown Of Today Vs. At Least Tomorrow’s Vaccine Is Not The Same ‘Stimulus’

The oil market has caught a mild case of raging disease. Not COVID, rather the purported cure for it. Vaccine-phoria has visited the energy sector and propelled oil prices upward while pulling less contango in the futures curve, awakening this commodity market from its post-August doldrums. It had been that detour in WTI which began to suggest this summer slowdown in the US and the global economy was a real thing.

On the one hand, prospects for a COVID-less future which presents a somewhat plausible path back toward a normal (at least in the post-2008 sense) economic condition. On the other, an absolute certainty that the rebound of today took a bad turn five months ago and hasn’t yet been able to regain its footing since despite an overwhelming inflow of “stimulus.”

The classic clash between today and tomorrow. For the oil market, we’ve been here numerous times before; “here” being a temporary infatuation with some kind of game-changing development.

From late December 2018, the bottom of that year’s devastating (Euro$) landmine, crude rallied for months on end – all the way to late April 2019 for what should have been a convincing 54% gain. A “Fed pause” had been talked about in the very same way that Pfizer and Moderna’s coronavirus breakthroughs are now. Jay Powell’s promise to stop “raising rates” was said to be the cure for the “unexpected” downturn that had already turned Europe (and Japan) toward recession.

Blamed on a combination of those hikes (“policy error”, it was called) and trade wars, a more compliant Federal Reserve couldn’t possibly lead to anything but more robust demand. Even WTI – for a time – agreed.

The problem, of course, was that the Fed hadn’t been responsible for the downturn and could not, could never, keep the US economy from joining its Atlantic and Pacific counterparts. There never ever is decoupling.

This euphoria cycle repeated once again if in reduced fashion beginning with October 2019’s not-QE and “repo” operations madness. Similar premise, same result.

That’s what markets do; they fluctuate and discount material factors which might alter probability spectrums. Meaningful changes in these, however, categorical shifts in underlying fundamentals are related to us across many market prices and indications. Temporary euphoria comes and goes all the time.

But this isn’t about that or really the oil market. Rather, it’s about the summer slowdown; the here and now, where we are today. This wrong turn in the rebound continues to show up everywhere, including, maybe especially, energy:

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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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