With Everything Going Right, Why Isn’t Oil Up More?
Bullish tail risks are occurring and yet oil’s price response has been relatively muted. While macro events were the primary driving force behind the crude oil rally (risk on, reflation and USD weakness), they now have fundamental support. A host of outages has occurred across the globe, which tally over 2 mmb/d, putting the market into balance for now. And the threat of greater outages or instability in at least two major producers – Venezuela and Nigeria – have lifted the probability of our tail risk scenario (one could argue Nigeria is already playing out).. Yet WTI is up $5/bbl since mid-Mar and less than that over the past month.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
