WTI weekly chart

The resilience in the oil market this week is shocking.


  1. Brutal market for risk assets with stock markets down six weeks in a row
  2. Other commodities -- namely copper -- down big
  3. China lockdowns ongoing, no sign of a shift from covid-zero
  4. Worsening sentiment about the economy
  5. Insane crack spreads driving up the cost of diesel and gasoline
  6. SPR adding 1 mbpd
  7. Libyan embargo to be lifted
  8. Still no EU ban

Yet here we are on the verge of a third consecutive week of gains for oil. The close last week was $109.77 and it's trading at $110.16. The $110 level is also notable because a close above it would be above the late-April interim high and the pennant that it formed.

The demand side is clearly impaired at the moment and that will worsen. Yet the market is still buoyant. The only nagging caveat is that perhaps some big players in the EU or Asia are aggressively stockpiling.

What this episode is demonstrating is that we're on the verge of a supply crisis. This comment from the IAE this week didn't get nearly enough attention:

IEA tweet

I have to think that's what is really going on here. Russia has talked a big game but people have figured out that they can't continue to deliver oil.

I think the oil bulls have to take their forecasts up much higher. Pierre Andurand was talking about $180 oil this week and that's suddenly very realistic.

Just as importantly -- barring a calamity in the global economy -- I think you can put a floor on oil near $80. There's no supply coming on and investment this year (planned and executed) is still far below 2019 levels.