A Vaccine & Oil's Minsky Moment
“The presidency has many problems, but boredom is the least of them” - Richard Nixon
MACRO / COVID.
WTI swings up 8%+…
…on a BIG Pfizer vaccine update…
…leading XOP up 16%+ on the day
We’ll take it.
Unrelated, but positive from the market’s perspective - the prospect of a divided government means that there’ll be gridlock in DC for the near future.
The absence of a “Blue Wave” means (likely) no tax hikes, MMT, or $(x)TN in fiscal excess…
…and the optimism (Risk-On) showed up in the flows -
Notable fund flows (Last wk, per BAML):
$6.5BN into equities
$1.3BN out of bonds
Perhaps politicians should take note of that - when they can’t do their jobs effectively - the market likes it -
OIL’S MINKSY MOMENT.
“Minsky Moment refers to the onset of a market collapse brought on by the reckless speculative activity that defines an unsustainable bullish period” [coined by Paul McCulley]
A recent Twitter conversation reminded us of McCulley’s hypothesis - specifically:
“We always said there will be a point as the oil age ends where they have to produce faster. Think we reached it. Market assigns zero or possibly negative terminal value to oil right now. You better whip that stuff out of the ground and sell it quick” - Paul Sankey [Nov 8th]
Hold that thought.
After reflecting on the comment, we asked ourselves a series of questions:
When (if ever) is Oil’s Minsky Moment?
How will OPEC+ respond to that realization?
Did shale already have its Minsky Moment?
We think the answer to (1) is not in the near future - there is an absence of viable alternatives.
The answer the (3) is probably sometime between Concho’s Dominator pad results (July ‘19) & ~April ‘20.
The reason (for shale) - fitting the definition of a Minsky Moment to a tee - is best described here.
Now, back to Paul Sankey’s comment -
If the market - or worse yet OPEC - did believe that oil was having its Minsky Moment (turned production up to 11), how would you respond?
With those cards, a producer can make two hands:
Pump & sell (Sankey’s call); or
Wait it out
Neither of which is particularly worth playing -
*If true* (we’re skeptical), a vaccine would be the single best news story in the last ~20yrs.
The impending Mink Massacre
Oxy earnings… or lack thereof
Don't start a fight that you can't finish
A cross-border E&P podcast interview
A hot-take on reserves & write-downs
“Euronav is like ‘a mint mansion in 1980s Detroit’”
☝🏻 A colorful tanker update
That’s it for this week - vaccines, COVID, & election-related headlines will dominate for the next few weeks - catch y’all next Tuesday -