You know things are bad in the oil markets, when a man who’s built $200B worth of personal wealth spearheading the movement away from fossil fuels… is calling to increase the output of those exact fossil fuels!
No joke, Elon Musk of Tesla and SolarCity recently tweeted this:
The market hasn’t been sidelined either – Oil & Gas related stocks have been some of the most active movers out there lately – just look up USEG, IMPP, INDO, NINE, to name a few!
Let’s see what’s so “extraordinary” about the current market, what’s to come, and how will any future policies affect the names we’ve been watching and trading!
Oil is Through The Roof
I’m not the guy to use “through the roof” or “to the moon” slang, but in the case of oil, there’s just no better way to put it – the price is through the roof and nearing the moon.
Here’s the long term chart of WTI crude oil:
Some of you may remember that in April 2020 we had the historical (and hysterical) “negative price of oil”.
That’s right, the demand was so low and futures expirations were right around the corner – traders around the world were willing to pay you money, to avoid having to take delivery on their futures contracts.
But those times are long gone…
By April of 2021, the price was already on a steady uptrend, hovering steadily over $60.
It is early March 2022 now, and oil has doubled once more – trading in the $110-$130 range, gaining over 40% in the past few weeks alone, boosted by the Ukraine-Russia conflict.
It’s not just us, traders, taking notice. It’s also us, people living everyday lives – as of yesterday (March 8th), the average price of gas in the US stood at an unprecedented $4.13 per gallon.
President’s Biden Stance on Oil
President Biden was never shy about his position on fossil fuels while on the campaign trail – he made the American (and global) transition to greener and newer sources of energy one of his top priorities.
On his first day in office, Joe Biden signed an order to “kill” the controversial Keystone XL pipeline.
Now, just a few weeks ago, as part of a legal fight, the administration decided to pause giving out new oil and gas leases and drilling permits.
Whether you’re on board with the President’s climate policies or not, one thing is for certain – the markets have been pricing in additional supply risks, as is evident from the Oil chart above.
If the steady price increase of 2021 didn’t draw much attention, what’s happening right now really hits consumers’ wallets and hits them fast…
And anything that does, usually takes a drag on political polling of whoever is in the office!
Hence, if the Biden admin were to ever ease their stance on domestic fossil energy production, right now could be the perfect time, especially when you have figures like Elon Musk openly calling for it.
Oil Stocks to Watch
Now, I’m not saying that the administration WILL necessarily do something.
I’m just implying that based on a sum of factors: truly through the roof prices, bad polling, supply issues, public pressure, and call-outs from major public figures – right now could be the perfect time to make a move on energy production.
I have no idea what one may be, but even a comment – coming from the President of the United States – could be enough to move the market many points in either direction.
Stocks like INDO:
And IMPP, to name a few:
…have seen some mind-boggling momentum buying lately, driven largely by the rise in oil prices.
And while traders like Jason Bond have their eyes glued to these names on a daily basis, I’d strongly encourage you to stay away from outsized “conviction” positions in the names, until we get more “political” clarity.
Raging Bull traders have traded the names lightly and mostly with short-term “point-to-point” moves – nobody wants to be stuck in a tanking momentum name.
If you are involved – make sure to keep your eyes and ears on the newsfeed and watch for any comments coming from the admin.