Oil Prices During Hormuz Crisis Suggests Traders Not Responding Properly to Supply Shocks
Posted by Alias_The_J@reddit | collapse | View on Reddit | 42 comments
This is related to collapse because it shows that, contrary to cornucopian claims, markets are not sufficiently transparent so as to smoothly adjust resource flows of critical resources if supply becomes constrained from, for instance, resource depletion. If anything, based on oil futures, it suggests that whilesale price rises may be muted as compared to demand shortfall.
In other words, we might start having shortages without obvious tells in the markets. This current oil crisis is especially obvious (even if new) and prices have not reflected the massive shortfall.
jadelink88@reddit
Too much 'pricing in TACO' when Trump chickening out as usual does not in fact open the gulf.
jferments@reddit
Supply and demand explaining prices is just idealistic classical economics textbook pseudoscience.
In reality, prices are set by cartels who collude to fix prices to maximize profits.
2C104@reddit
GME is a perfect example of this
Cultural-Answer-321@reddit
Fact.
leisurechef@reddit
This video dropped this morning which talks about the separation of futures oil & real oil pricing spread, it’s had over half a million views in 7 hours!
Thehealthygamer@reddit
Great watch, funny i made essentially the same video at the same time, just not nearly as well done as his.
https://youtu.be/eNOdXjsQzSk?is=PsM2yq3CXVQbDauX
The shocks coming down the line are gonna make people look fondly at the Covid era.
ISB-Dev@reddit
I feel like I've heard this before. I'll believe it when I see it.
Livid-Rutabaga@reddit
The 70's won't look so bad.
leisurechef@reddit
Nice thanks I’ll add it to my watch list
Hey FYI the “is=PsM2yq…” is Google tracking & can be deleted
gabemoment_@reddit
just watched this like 8 hours ago lol, great video he's a really good creator. he was making really good videos during the pandemic too
leisurechef@reddit
I take each video on it’s own merits & this one is a banger
Chucking100s@reddit
Wonderful share.
leisurechef@reddit
Thnx
mrbipty@reddit
Thanks for sharing, it confirmed a lot of my thinking around this issue.
But it is Tuesday tomorrow so let’s see what happens
leisurechef@reddit
Oh I’m sure the Billionaires are doing everything they can to buy more time for this war but time will show Iran only cares about keeping the Strait of Hormuz closed & choking the global economy long enough to crash the US Bond Market & force everyone or at the least the GCC to pivot from the US Petrodollar to the Chinese Petroyuan
mrbipty@reddit
To say this is backfiring on the US would be an understatement. The underreported bond market flood of cash to China treasuries will be the defining moment in the yuan taking over the petro status. Definitely one to watch.
leisurechef@reddit
This is quite simply the US’s “Suez” moment.
We are literally watching the change of the global reserve currency in real time.
I just hope nations can keep their fingers off nuclear triggers during these difficult times
gc3@reddit
Isn't that the price now and the price expected I can the future? Those can differ
leisurechef@reddit
He explains it all nicely in the video
Romano16@reddit
Hey we’re initially. Now I feel there’s some sort of threats from the U.S. government that is manipulating the true cost. Because the strait situation has gotten worse, not better.
NearABE@reddit
How does the straight situation “get worse” than being closed?
mrbipty@reddit
If you guys really want to get scared look into superphosphate. Critical in feeding us. Price has doubled. Millions of starving people worldwide. Made in the gulf from natural gas.
NearABE@reddit
The gulf also makes ammonia, urea, monoammonium phosphate, and diammonium phosphate. Other countries make fertilizer using natural gas which also comes from the gulf. So does not matter which inorganic fertilizer you look at they all come from the gulf.
Other countries still have lots of phosphate rock sources. You can import sulfuric acid or hydrogen sulfide (which oxidizes to sulfuric acid). The Gulf States sold this too though. It is produced by removing from petroleum and gas.
Apprehensive-Bus9366@reddit
Why would they, if the world accepts a large differential between paper and physical prices, then any trump tweet allows them to move markets in their favor multiple times per week. I'll bet even Barron is wetting his beak with paper oil price fluctuations.
Rothmier@reddit
Shock horror! You’re saying the wise and omnipresent guiding hand of the market is being manipulated?!?! How could this be???
Cyberpunkcatnip@reddit
The markets have been separated from reality for at least a year now
jsc1429@reddit
The markets have been separated from reality since forever…from the tulip panic up to Tesla and Nvidia now, all not based on reality
BobDobbsHobNobs@reddit
It’s all ‘animal spirits’ all the way down
Kahnza@reddit
ACOOCHIEMOYA
rematar@reddit
The financial economy detached from the materials economy decades ago
-Dr. Sidney Smith
LovesFrenchLove_More@reddit
Traders, investors (small and large) have thrown out logic in regards of their trading decisions a long time ago.
It’s not about trying to figure out how well a company is doing anymore. Instead it now is all about what will the sheep do and trying to be the first to profit from it.
While stock exchange trades have always been mostly about psychology, gambling and making big (quick) money, now it’s only about just that.
And the elected government of one of the largest countries is nothing but a corrupt insider manipulating mob, more people than ever are trying to profit from it while real logic or common sense have been made redundant. Not saying that some other parties and/or countries and their government are not interested in manipulating markets either.
NyriasNeo@reddit
" prices have not reflected the massive shortfall."
No. Prices are forward looking. They are pricing in TACO right now.
Texuk1@reddit
the price we see when we google Brent crude price is not reflective of the actual oil market which is much more asymmetrical, non-transparent, unevenly distributed, under long term contract. processing plants and refineries need to know the grade if their products and when it will be delivered to keep their systems running. Just because someone needs a tanker doesn’t mean any one is available for any price. Also a refinery is not gonna pay 200 if it’s selling into a market that can’t absorb the cost. This is where national security comes into play and governments have to scramble for resources to prevent anarchy and revolutions.
The spot crude might be hoping for a TACO because it is linked to free barrels but the actual market is in trouble.
Alias_The_J@reddit (OP)
Then they've been banking on the goodwill of Iran for over a month and- based on current futures contracts still sitting below $100/bbl- are apparently now also pricing in teleporting tankers and instant repair crews.
More to the point, there's no sign that they'll be able to properly price in shortfall under more fundamental constraints than bad American foreign policy.
fake-meows@reddit
If there is enough of a supply shock, demand for oil will be destroyed as the economy grinds to a complete halt.
This is why the future price that people will be willing to pay won't be high. The future prices can't skyrocket if businesses are closing and people don't have work.
The futures market is betting on a complete meltdown.
Orange_Indelebile@reddit
It is well known there is no correlation between oil prices and oil consumption.
The world economy is so dependent on the stuff that prices do not matter.
It's nothing new. Does an heroin addict really cares about the price of the drug, not really, v he will always find a way to get it. And if there is a supply issue, the world GDP goes down.
There is however a direct correlation between real world economy/GDP and oil supply.
brendan87na@reddit
the market will remain irrational until every dollar is sucked out of everything
FlyingDiscsandJams@reddit
Yes, but on the other hand, corporations are able to reclaim $186B in tariffs without having to refund customers, so that's good for profits. So is proce gouging.
ComingInSideways@reddit
This boils down to my very rigorously thought out hypothesis:
People b stpt an grety.
StatementBot@reddit
The following submission statement was provided by /u/Alias_The_J:
This is related to collapse because it shows that, contrary to cornucopian claims, markets are not sufficiently transparent so as to smoothly adjust resource flows of critical resources if supply becomes constrained from, for instance, resource depletion. If anything, based on oil futures, it suggests that whilesale price rises may be muted as compared to demand shortfall.
In other words, we might start having shortages without obvious tells in the markets. This current oil crisis is especially obvious (even if new) and prices have not reflected the massive shortfall.
Please reply to OP's comment here: https://old.reddit.com/r/collapse/comments/1srb69e/oil_prices_during_hormuz_crisis_suggests_traders/ohdk0ep/
Alias_The_J@reddit (OP)
This is related to collapse because it shows that, contrary to cornucopian claims, markets are not sufficiently transparent so as to smoothly adjust resource flows of critical resources if supply becomes constrained from, for instance, resource depletion. If anything, based on oil futures, it suggests that whilesale price rises may be muted as compared to demand shortfall.
In other words, we might start having shortages without obvious tells in the markets. This current oil crisis is especially obvious (even if new) and prices have not reflected the massive shortfall.
Ekaterian50@reddit
This should be readily apparent to anybody who understands betting. Big investors are just hedging their bets and hoping that they can bluff markets into bouncing back or at least increasing short term returns. What a shitshow 😅