Before it plays out this year, let me read to you from the world’s most important storybook.
But first, a question. Who owns America’s biggest oil refinery?
Well, yes, it happens to be Saudi Arabia, where today President Trump is helping close business deals worth maybe $200 billion. Yes, that’s B for Billion.
Then, this coming week, Saudi Arabia and Russia will close their deal with the remaining partner countries in the oil production cut-back.
http://in.reuters.com/article/us-opec-saudi-russia-idINKCN18B06K
As Reuters reported: “Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said in a statement they would “do whatever it takes” to reduce the inventory overhang.”
Do you think this was not discussed with the Saudi leaders by Trump and his key people this weekend?
Why does the US Secretary of State just happen to be the same man who quit as Chairman and CEO of America’s biggest oil company, Exxon Mobil, in order to join the Trump administration in such a crucial role? And, why did he spend time in Russia following the Trump election victory?
A true “Friend of Russia” is Mr. Rex Tillerson.
http://money.cnn.com/2016/12/11/investing/rex-tillerson-exxon-russia-putin/index.html
Are you starting to line up the dots?
On March 29, I reported what I saw happening. I called it Oil&Gas Rally Underway.
https://www.billcara.com/oilgas-rally-underway/
After a move then from ~48 to ~53.50, there was a snap pull-back in the WTIC futures to ~44, caused by the powers-that-be to lead the weak hands to throw in the towel — at the worst possible time.
https://www.investing.com/commodities/crude-oil-streaming-chart
From 44 on May 4th and 5th, WTI futures zoomed +15.0% in two weeks to a close this week (May 19) at 50.58.
Where to from here?
I say Crude (WTIC) is on its way in two weeks to 57 upper resistance, which would be a further gain of about +12%, then consolidate, then move up to 62-65 level for more consolidation, and finally, later in the year, possibly 4Q2017 or 1Q2018, up to 73+, a point where the global Oil industry will make a sustainable profit again.
That must happen. It will happen.
Saudi Arabia, Russia and … Trump… will make it happen.
Implications:
Short-term, Oiler stocks will lift to much higher prices now as their reserves, especially the heavy oil reserves, will be revalued.
Longer-term, central bankers will be helped by the Oilers in the plan to raise their bank lending rates, further extricating loose money from the system that is now causing real estate prices to pop. Of course, the central bankers will blame inflation as the culprit, when in fact it was their own decisions to cut lending rates to zero that is to blame.
With the Oilers and Bankers leading the way to higher equity market price levels, the average investor will sit back in disbelief, frightened to stay onboard. Then at the peak, these weak hands will jump in as they always do, only to once again at the cycle top be ripped off.
That doesn’t have to happen, but it will.
When is the Cycle Top to occur?
This major cycle top that I describe will occur sometime in 2018, or 2019 or 2020. Nobody knows precisely when that will happen. There are pundits like Martin Armstrong who will tell you they know, but they don’t know.
But my point is, it will not be happening any time soon. This past week the central bankers of the world played their hand. They showed the smart money of the world that it’s safe to stay in the game.
Meanwhile, this smart money has been playing the public for suckers, leading them to believe that the Oil industry is dead, all the time buying up massive equity positions themselves. Even Motley Fool played the public as Fools, and I told you at the time I was no Fool.
www.billcara.com/bill-caras-blog-march-16-2017/
https://www.billcara.com/bill-caras-blog-march-16-2017/
In fact, I have been watching the Oiler storybook play out since mid-December, when I figure Tillerson was told by Russia that more time was needed to prepare for the game. Trump too needed time. Then right before Trump’s global tour with Tillerson, the Washington media, figuring something was happening with Russia, starting making noises, loud noises, that Trump had given away the nation’s secrets to the visiting Russian foreign minister and ambassador to the US. They would not accept the decision by Trump to exclude them from covering the meeting while he allowed the Russian photographer access.
www.nytimes.com/2017/05/10/us/politics/trump-russia-meeting-american-reporters-blocked.html
Yes, the media tried to smear Trump and, as I wrote, ended up, with the help of the weakest people in the Trump administration, making POTUS look to the world like DUFUS.
While I don’t like the Trump style, I do very much like most of his policies, healthcare the exception for the time being.
Why did I say late this week that it was a good time to off the majority of Goldminers? Because I know we the people can’t fight the central banks. Now they want the public back into equities and out of gold.
We have to take their nonsense until they end up destroying the capital market.
I also know however that central banks cannot control the global economy and that Oil is the engine that makes the economy run and continue growing. So, central bankers (Draghi, Carney and Dudley), the guys paid by the powers-that-be, will now step back to allow the Oil playbook be implemented. They’ll do it because inflation will creep to a higher level wherein central bankers will blame their coming higher rates on we the people.
Nothing changes. The cycles just get bigger, the politics nastier, and central banker mistakes stupider.
Until the Humongous Crash that will follow the cycle top, followed by a US congressional investigation into the central bank algorithms that will have by then destroyed our capital market, the public will not come back to equities until these algorithms and HFTers are outlawed by Congress and other governments.
Strong words, but just wait for it to happen. It’s inevitable.
