Oil is slightly above the European high after this report from Bloomberg. I suspect this was largely anticipated but price action shows it wasn't entirely priced in. We're well past the point where unintended consequences ripple throughout the oil market and into inflation.
Earlier today, Shell said last week’s decision to purchase a spot cargo of Russian crude oil “was not the right one and we are sorry”.. The company said it will stop spot purchases and wind down long-term contracts. Critically, they warned it would "lead to reduced throughput at some of our refineries."
Disaster looms and central banks will be forced to hike into a stagflationary economy. The war in Ukraine has been a game-changer.
Update: Biden will make the announcement in Texas today. That's an interesting choice of locations and suggests he will couple it with a call to expand US production. However he's going to find that a lack of pipe, fracking crews and an appetite to expand capital spending is going to lead to a disappointing result. I wrote about capacity constraints here.
From a fracking CEO:
"Because labor is so tight, we will continue to see labor availability as a very significant bottleneck in crew additions, whether it's in the fracturing industry or the drilling industry. And so, I think the industry overall will be sort of operating at its max capacity from a people perspective. And whether there is discipline or not, it probably won't matter, because people just won't be able to add equipment like they used to. It just takes so much time now to get additional people. And I think we've communicated this many times before, but we did add Crew 7 in our fracturing division. It took over 6 months to get the people to add that crew, and so we don't expect that's going to change going forward."
WTI crude oil is up $6 to $125.35.
