MACRO - USOIL - The Suez Canal - The Black Swan of 2021
Updated
The current situation with Oil and the Suez Canal reminds me of an incident in Edwin Lefèvre's "Reminiscences of a Stock Operator"...
1917:
"There wasn't anything to do except to wait for the market to open the next day. I recall that at Gridley's that night one of the greatest captains of industry in the country was offering to sell any amount of United States Steel at five points below the closing price that afternoon. There were several Pittsburgh millionaires within hearing. Nobody took the big man's offer. They knew there was bound to be a whopping big break at the opening.
Sure enough, the next morning the stock and commodity markets were in an uproar, as you can imagine. Some stocks opened eight points below the previous night's close"
From CBC:
"About 10 per cent of the world's crude passes through the Suez canal every day, so if it is closed off for any length of time, the cost and difficulty or rerouting it will be borne by customers...
There were concerns that idling ships in the Red Sea could be targets after a series of attacks against shipping in the Mideast amid tensions between Iran and the U.S."
Speculation:
A. By chance, or not, this event may delay the inevitable in the US market's collapse by artificially inflating the price of oil through cutting off demand... It is obvious from aerial images that this will not easily be cleared up in a few days. However, oil stockpiles are full. China and Europe will not be buying, should the oil need to be unloaded. In fact, it would not be surprising if it was dumped into the sea!
B. Military tensions are at an high due to the Iran-Iraq-Syria/Israel-Greece-Cyprus pipeline dispute. Iran has a recent history of tanker seizures, and military conflict is likely in the nearest future.
A or B or a combination has a non-trivial probability of occurring here. We will soon have true price discovery of Oil... The last bastion of hope holding up the US market right now.
The Suez Canal Incident may go down in history as the Black Swan event which triggered the 2021 crash.
News is priced in when the trend favors it, and when the market is anxious and watching for any potential catalyst... This seems a good reversal event as any.
I have been short on the global market and long volatility.
Just my thoughts and speculations...
Economics and markets lead geopolitics, the world, and even natural events... Self-fulfilling prophecies or not, that's up to you to believe.
My previous Oil forecast:
GLHF
- DPT
1917:
"There wasn't anything to do except to wait for the market to open the next day. I recall that at Gridley's that night one of the greatest captains of industry in the country was offering to sell any amount of United States Steel at five points below the closing price that afternoon. There were several Pittsburgh millionaires within hearing. Nobody took the big man's offer. They knew there was bound to be a whopping big break at the opening.
Sure enough, the next morning the stock and commodity markets were in an uproar, as you can imagine. Some stocks opened eight points below the previous night's close"
From CBC:
"About 10 per cent of the world's crude passes through the Suez canal every day, so if it is closed off for any length of time, the cost and difficulty or rerouting it will be borne by customers...
There were concerns that idling ships in the Red Sea could be targets after a series of attacks against shipping in the Mideast amid tensions between Iran and the U.S."
Speculation:
A. By chance, or not, this event may delay the inevitable in the US market's collapse by artificially inflating the price of oil through cutting off demand... It is obvious from aerial images that this will not easily be cleared up in a few days. However, oil stockpiles are full. China and Europe will not be buying, should the oil need to be unloaded. In fact, it would not be surprising if it was dumped into the sea!
B. Military tensions are at an high due to the Iran-Iraq-Syria/Israel-Greece-Cyprus pipeline dispute. Iran has a recent history of tanker seizures, and military conflict is likely in the nearest future.
A or B or a combination has a non-trivial probability of occurring here. We will soon have true price discovery of Oil... The last bastion of hope holding up the US market right now.
The Suez Canal Incident may go down in history as the Black Swan event which triggered the 2021 crash.
News is priced in when the trend favors it, and when the market is anxious and watching for any potential catalyst... This seems a good reversal event as any.
I have been short on the global market and long volatility.
Just my thoughts and speculations...
Economics and markets lead geopolitics, the world, and even natural events... Self-fulfilling prophecies or not, that's up to you to believe.
My previous Oil forecast:
GLHF
- DPT
Note
"The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past." - Thomas F. WoodlockNote
It is said that the Suez Canal trapped "The Ever Given" is costing the global economy $400 Million USD an hour!
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