Blazing

With the market rubbing its thighs at the prospect that the Federal Reserve might start to hit a few irons off the tee, the risk trade is back on. The Santa Rally is real. Up we go. Whilst there was little new out of this week’s show and tell from the Fed Chair, the market reaction speaks of some appetite to run with the hares. Of equal interest, post footage on social media of Chinese government surveillance drones buzzing the high rise apartment blocks, is that some regions are starting to lift up on the lockdowns. One Vice Premier Sun Chunlan announced that the virus was weakening and – hold on to your masks – was no longer such a big deal. Dog walking is back on. Good news. Not such good news for those wanting a lower oil price, though. Traders have pushed benchmark prices lower on the recession narrative but with China back on the pitch there is likely to be a big bid coming to the crude pitch. Recent shenanigans aside, the reality of the oil market – so suggest some analysts  – is that demand is about to surpass global oil pumping capacity. For the first time. Ever. Normally when demand gets a bit hot, some producer loosens a spigot, supply comes on, prices ease. No more problem. And yet, and whisper it quietly, there is now a view – long rumoured, perhaps – that OPEC’s current flow of approximately 30 mm b/d is it. There is no more. Talk of excess reserves are not true, as many of the big fields are near exhaustion and if demand runs up, there are no more spigots left to pop open. All that’s propping up inventories is the recent politically motivated move in the US in tapping the so called ‘strategic reserves’. Tapping reserves can’t go on forever. As those who have patiently been positioning for a spike through $200 know, only too well.