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Things Are Pretty Shocking On The Oil Market Front

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here.

The stock market is kind of treading water waiting for Friday’s payroll report. It will probably be up nicely because ADP announced on Wednesday that 208,000 private payroll jobs were created in September.

Trade, transportation and utilities accounted for the 147,000 of these private jobs. Good producing industries lost 29,000 private jobs, while natural resources/mining (mostly energy production) lost 16,000 jobs. According to ADP, average pay rose 7.8% in the past 12 months.

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The Labor Department on Thursday announced that new unemployment claims rose to 219,000 in the latest week, up from a revised 190,000 in the previous week. Continuing unemployment claims rose to 1.361 million, up from a revised 1.376 million in the previous week.

The 4-week moving averages of weekly and continuing unemployment claims are still declining, so the Fed will not be deterred from hiking key interest rates by the unemployment situation.

Shocking Oil Market

OPEC+ on Wednesday announced up to a 2 million barrel per day production cut. However, the real production cut may be more like 900,000 barrels per day after factoring in Russia’s production declines and some smaller OPEC members.

The bottom line is that OPEC+ wanted to “shock” energy markets to get crude oil prices per day up to $100 per barrel. As always, Saudi Arabia can implement the biggest production cuts and its output will likely determine the ultimate crude oil production cut.

The primary reason that the prices at the pump moderated in recent months is that the Biden Administration was purposely manipulating crude oil prices by releasing 1 million barrels per day from the Strategic Petroleum Reserve (SPR) but I am sure that after the midterm elections, the Biden Administration will have to start refilling the SPR since it is now at the lowest level in approximately four decades.

Things are pretty shocking on the oil front. Fall is the time of year when oil demand is low, so if oil prices are going up now, what will happen in spring? We might be headed for $100 to $120 a barrel of oil in spring depending on how strong the global economy is.

Erratic Treasury

The only real threat to the market has been these Treasury yields. The Treasury market, which is the most liquid market in the world is behaving a little bit more erratically than it used to.

The reason the market was so bad in September was that rising Treasury yields were sucking money out of the market. We do not want to see Treasury yields spike again but they are stubbornly high right now. We expect the Fed to raise rates in November to get closer to market rates.

Calm Before Storm

Right now is the calm before the storm. Earnings will be coming out soon and I expect them to work. We are in a seasonally strong time of year – the fourth quarter is the strongest quarter for the market historically.

The green energy revolution remains constrained by supply glitches and soaring battery component costs. Tesla Inc (NASDAQ:TSLA) delivered a record 343,000 vehicles in the third quarter, but analysts were expecting 364,660, so the stock was hit with profit taking.

Tesla actually produced 365,000 vehicles in the third quarter, so they were in line with analyst estimates, but some vehicles were still in transit.

Wedbush called Tesla’s delivery shortfall a “logistical speed bump” and I would agree that the company is dealing with supply glitches better than most auto manufacturers.

However, I would recommend that you buy Porsche AG (ETR:P911) over Tesla, since Porsche trades at less than a third of the forecasted earnings of Tesla and has bigger operating margins. I should add that Porsche fell below its IPO price and is a good near-term buy.

Coffee Beans

An animal services officer in California responded to a middle school to remove an unusual intruder -- a coyote in a bathroom stall. All the children were okay and the coyote was released back to its more natural habitat. Source: UPI. See the full story here.