covid-induced market melt-up

the new trend

Hondo Lane | June 25, 2020

(Petrolytics) - Looks like we're in for another cycle of COVID-dominated headlines. The situation in Houston definitely appears to be on a grim trajectory in terms of ICU capacity. Only time will tell. We're hedging by wearing masks and avoiding unnecessary gatherings.

Similarly, the markets have caused some heartburn across FinTwit (as usual). Some popular thoughts are the markets might appear to be disconnected from reality; we'd like to propose the assumption that, perhaps, it's a leading indicator. Put simply, we tend to attribute current trends to the resolution of future uncertainties (or the Fed Put). The point being that, obviously, predicting the market is improbable.

Enough of that, here's a few pieces to get the juices flowing this morning. Interested to hear your thoughts as we enter the seasonally slow summer months.

  1. Texas Railroad Commission Drilling Permits - for those who like Power BI and Spotfire. A fun dashboard illustrating the drilling permit database. May 2020 is (unsurprisingly) about a 3rd of May 2019.
  2. WoodMac on the changes to upstream - Given many players were in serious pain two years ago, we're anticipating a "blood in the streets" type event. Not convinced we saw enough pain in 2015-2017 timeframe to clear the water.
  3. Switch Energy Alliance - If you haven't seen Dr. Scott Tinker speak, you're missing out. Excellent material. Highly recommend.

In any case, we've seen a pretty historic rise in oil prices over the last few weeks. And while the absolute price is still abysmal, we're hoping the -$40/bbl debacle earlier this spring was a capitulating event (and the bottom). The EIA appears to think we're in for a short-term price recovery, and has revised their 24-month forecast to a more V-shaped protocol. Additionally, any talk of peak demand accelerating a few years is total nonsense. No one has a clue.