Friday, March 18, 2022

Bro, Buy Hydrocarbons, Number Go Up

A European size number:

On Friday WTI futures settled at $103.28; Brent at $108.20.

We haven't made the oil pitch since the Russian invasion of Ukraine but in the first week of February it seemed a good entry level:

February 8 
We've become pretty much convinced oil is a one way trade. Not that every tick is an uptick but that the trend over most time-periods will be up....

Feb. 3
WTI crude oil tops $90 a barrel for first time since 2014
Feb 1
"Fuel for Thought: Persian Gulf energy producers caught in the middle of new world order"—Platts
Whoa! "OPEC+ Fails To Reach Production Targets In January"

Since 2012 when the Carbon Tracker Initiative came up with the idea as a pitch to keep hydrocarbons in the ground we've been kicking around in-house what, if any, effects the the carbon bubble/stranded assets arguments will have on price, and to this day don't have a clear-cut answer for patient reader.

Well, six years later we have a bit more clarity, oil companies have been putting money in shareholder's hands rather than in the ground, nothing dramatic, on a year to year basis but on a decadal scale it's hundreds of billions/trillions that didn't go into exploration.

January 27
GDP: A Dichotomy in Commodities—"Oil Could Be The Haven Stocks Traders Need To Shelter From Fed" 

And some more January background:

ESG is currently over-owned, oil & gas under-owned in light of the fact that 10 years of "stranded asset" talk.... 

Platts' "Commodity Tracker: 5 charts to watch this week"

ECB: "Looking through higher energy prices? Monetary policy and the green transition"
....And yet, the roots of today’s shock are likely to go deeper. While in the past energy prices often fell as quickly as they rose, the need to step up the fight against climate change may imply that fossil fuel prices will now not only have to stay elevated, but even have to keep rising if we are to meet the goals of the Paris climate agreement.

In my remarks today, I will discuss the challenges that such prospects pose to both fiscal and monetary policymakers in an environment in which the supply of cheaper and greener sources of energy will only gradually be able to meet rapidly rising demand.

I will argue that governments will need to push the energy transition forward, while at the same time protecting the most vulnerable members of society from energy poverty.

Central banks, in turn, will have to assess whether the green transition poses risks to price stability and to which extent deviations from their inflation target due to a rise in the contribution from energy to headline inflation are tolerable and consistent with their price stability mandates.

I will explain that there are instances in which central banks will need to break with the prevailing consensus that monetary policy should look through rising energy prices so as to secure price stability over the medium term.

Fast rise in carbon prices helps accelerate the green transition.... 
 
That was from the European Central Bank:
Remarks by Isabel Schnabel, Member of the Executive Board of the ECB

....She pretty much lays it all out right there. As with European carbon, it appears that we have an upwardly moving market price created by rules and regs. If the above doesn't communicate what has been decided let's try....

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