Happy "Oil Massacre" Thanksgiving 2023 !

Plus ça change

First of all, Happy Thanksgiving to everyone. I’m grateful you are reading this Shrubstack on your holiday instead of spending time with your family. Actually .. shame on you. Finish reading and go help with the lunch preparation … seriously …

I have a natural aversion to owning Oil and Energy in November.

I have shared in a previous Shrubstack the seasonality of Oil in November ( see here for full post). Here’s the chart below, November isn’t great.

The other reason I avoid Oil (except Olive Oil) during this festive season, is because of the bad history with previous Thanksgiving Oil Massacres. I will only list the notable ones I recall (please note I’m not an oil historian, I’m a shrub with a “google” and a weak memory):

The Thanksgiving Oil Massacre of 2014

This one was the Mother of the Thanksgiving Massacres, simply because the magnitude was so big at the time. Oil peaked at $107 in June 2014 and was down to $76 by Thanksgiving, prior to a key OPEC meeting.

To set the stage a bit better, 2014 was the Shale boom and hundreds of $billions were invested in equities and credit in the space. No ESG back then, only greed. You could say that Shale was the Crypto / Ponzi / SPACs of its time. Equally worthless as those tulips.

Zoom to end of November, OPEC meets up to debate cutting production levels and defend prices. All the monkeys expected the Saudis to take the hit and cut production. And then the Saudis decide to hold production at current levels so that OPEC maintains market share … And that was it.

Oil closed the year at $53 , a 50% drop from the top.

The Great Oil Crash of 2018

This one probably started with Trump getting the Saudis to ramp up production to all-time high. And then he took a softer approach on Iran. End result was a supply glut. Oil was down 40% from the highs and down 20% in November.

The Thanksgiving Oil Mini-Massacre of 2021

2021 wasn’t that bad but it was still memorable being so close to today. Oil “only” dropped 20% from the high and a casual $20 per barrel.

I couldn’t even remember why it dropped so I had to “google” it (I won’t say I “chatgpt-ed” it). It was due to the resurgence of a new strain of the Coronavirus, called Omicron and that freaked out everyone.

And here we are to Today …

There’s a key OPEC meeting this weekend. It was rescheduled from Nov 25-26 to Nov 30. How’s the current setup looking?

Well to start with, early in the year a shrub predicted that OPEC would cut more times in 2023 than the Fed. Lo and be hold, OPEC already cut a few times and as for the Fed, we are still waiting.

OPEC+ has already reduced production by >5m bbd, of which the Saudis are at 3m bbd. We are talking about 5% of the global production here!

Referring to EIA data, OPEC now has spare capacity of 4.3m bbd, compared to 2.4m bbd back in 2022. Compare that to history and it’s pretty high.

And as we enter this Thanksgiving OPEC meeting the only question worth asking is:

“What does Saudi Arabia want?”

On one hand, the Saudis are annoyed a) with their partners “cheating” and failing to comply with their quotas, b) with the US reaching record production, c) maybe with foregone profit that could’ve funded the purchase of another football team.

On the other hand, the Saudis have serious credibility given how they acted during previous Thanksgiving massacres, and everyone else may fall in line with their demands.

All I know is that this shrub won’t be participating on the long side of Oil until this OPEC meeting is done and dusted. Sometimes you just have to respect Seasonality and History!

GLTA and do post those cool Thanksgiving food pics!

Disclaimer: Nothing here is investment advice, this is the trading blog of a shrub, this is parody, I could be in my parents’ basement trading for all you know, don’t be stupid!