It blows over.
That's my rap on the Saudi Arabian attacks.
Yes, it is surprisingly easy to attack facilities with drones. If 10 unmanned drones can take out 5.7 million barrels a day -- about half of their production -- and we still can't take out $60 on West Texas Intermediate, then that tells you about the limited staying power of this move.
In fact, I think only the lack of infrastructure in Corpus Christi Texas and the inability to put up enough pipelines from the Permian is keeping us from stabilizing the market immediately.
That, plus the fact that we would rather not stabilize the market and instead take share and use higher prices to sell forward to fix balance sheets for more drilling ahead.
Who are the real winners? I think it is outfits like Raytheon (RTN) -- which is merging with United Technologies (UTX) -- and L3Harris Technologies (LHX) -- which has fantastic radar capabilities. I think every important piece of infrastructure must now be "hardened" by radar that can help shoot down drones, especially drones that one day will be powered by solar energy.
Our producers will clean up and so will our refiners, but you need to be very dexterous if you want to make money on that trade, and it is a trade.
Who are the losers?
First, Saudi Aramco. This, like We, is another deal we don't need, we meaning the market. I always find it surprising that the market tolerates something that's bad for the market. But there is so much money indexed that the natural complaining constituencies have no hope of saying to the syndicate desks: "We won't buy any." There isn't any one in there fighting for the investor to not have the deal come because the individual investor doesn't matter to these firms.
So the Saudis, who temporarily will enjoy higher prices created by their own lack of cover, will be big losers when it comes to Saudi Aramco's offering. They should have done it ages ago.
Second loser? The Chinese. I know that the mainstream media never wants to hear anything but how the Chinese play the long game and are so all-powerful that they have to win in the end, but the country is resource poor and it needs more oil at lower prices. We ship a huge percentage of our oil to them. They will need more.
Third loser? The short sellers. This group has been a lay-up short, an annuity, as the stock have long since taken out the lows of a few years back when oil traded at $26. You can see some real pain today. If you own any of these stocks, time to trim.
Finally, the algos. The algorithmic traders know only one thing: When oil is up that means demand is strong, that's it's never about supply.
I have been saying ever since the Permian took off that it is about supply. Their models will be revealed to be set wrong.
Couldn't happen to a more stupid bunch of so-called geniuses, mathematical emperors with no clothes.
