There are tons of reasons to believe that oil can stay in free-fall. There's ample production here, as we know from the reports of EOG Resources (EOG), Pioneer Natural (PXD) and Devon (DVN) this morning. We know Europe seems on the verge of collapse. Despite the rise in the Baltic Freight index, you have to be amazed that China seems to have slowed for all but buyers of goods on Alibaba (BABA).
But what if the United States really starts kicking into high gear? What if, as a result of a confluence of positives, the 3.5% GDP growth is the beginning of a run? What if business has simply been waiting for something like what happened in the election and grows more confident?
Isn't it possible, just possible, that we are nearer to equilibrium than we think we are? Isn't it possible that we have hit a level where there's more use of the stuff?
I think the decline is so shocking that few consumers believe it has staying power. But what if oil just calms down?
I write this because after I saw robust oil numbers today and the stocks started running, I figured it was only a matter of time before they reversed and headed down. That's how strong the vortex has been. But it hasn't happened yet. The stocks are hanging in there.
I know, I know -- that's because the oil futures are up. Nevertheless, the groupthink on oil is that it isn't just going to stop at $75 or $70 but it is going to the $60s.
When oil was in the high $80s and low $90s I asked Charif Souki, the prescient CEO of Cheniere Energy (LNG), whether oil was about to bounce. He said, nope, it could go to the $60s. It was a jaw-dropping comment and I know a lot of people thought it was self-serving that he said it, even as, frankly, it was just the opposite. He needs oil high and natural gas low to build out a 10- or 20- year plan -- hardly self-serving.
But it is not jaw-dropping. I am wondering if Souki's view has become consensus. I am wondering if the group hasn't become so under-owned and the commodity so shorted that anything -- a big ISIS win, an oil kingdom threatened -- would cause it to jump back with the obvious backdrop of a stronger U.S. behind it.
Let's just say that no one I know is thinking that. Souki's in the majority now.
Somehow, I don't think that's how things pan out. Just something to think about.