Housekeeping: Good Morning.
“The Gold reset is a process, not an event”
Today:
Analysis:
Oil’s Current SituationPremium Discussion:
Oil Deep-Dive Geopol, Flow,
Premium Analysis: Oil’s Current Situation
The risk to Oil is higher not just from Israel/Iran risk, but from likely initial compliance by junior OPEC+ members to the Saudi warning. This also reflects max pain to short CTAs. Event risk warns of $5 moves either way if war escalates or alternatively if OPEC+ frays more.
First the Facts:
Prices are near the lows of their range for the past 3 years
Middle East tensions have done little to prop prices up until very recently
Lower oil prices are good for the US, Europe and China; Bad for Russia and OPEC+
The News:
There are two items on top of traders’ minds right now with regard to Oil: 1) Israel-Iran, and 2) OPEC+ Solidarity
Israel Says Likely to Target Oil Facilities
Israel's military is preparing a 'significant retaliation' to the attack by Iran. They are readying "significant" response to Iran missile barrage which could involve targeting oil facilities
Saudi Minister Threatens Price War to Fellow OPEC+ Members
The Saudi oil minister called out members for overproducing. saying prices could drop to $50 if cheaters within OPEC+ don’t stick to agreed-upon production limits. The statements were interpreted by other producers as a veiled threat from the kingdom that it is willing to launch a price war to keep its market share.
The Analysis:
Prices are near the lows of their range for the past 3 years
Middle East tensions have done little to prop prices up until very recently
Israel’s Oil threat is real and very dangerous
Government intervention is suspected of keeping a lid on futures prices
Term structure indicates some unnatural deferred hedging
OPEC solidarity is starting to slightly fray publicly
For Miners: Lower oil prices is good for energy costs. But this has been apparent for some time. That means mining shares are not attracting flows for a different reason. if that reason makes no sense, you buy them and get a nice dividend while waiting for a cap gain. Can also be an operational sweet spot for miners.. make sure you know their hedge book before betting on upside
**In depth OIL analysis continues at bottom**
News Analysis:
![Goldman: "The secret buyer has elevated prices and reset the [Gold] relationship"](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-video.s3.amazonaws.com%2Fvideo_upload%2Fpost%2F149612583%2Fb9fee0ab-60c0-412f-a09b-aef8742cc00a%2Ftranscoded-00001.png)
Equity Recap:
US equities retreated on Tuesday amid concerns about rising geopolitical tensions in the Middle East. US crude oil prices rose over 2%. Large caps bested small caps: S&P 500 (-0.93%) vs. Russell 2000 (-1.48%). MSCI Emerging Markets (EEM) added 0.72% and MSCI EAFE (EFA) fell 0.74%.
Market News:
"Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Iran : FT
"A strike hitting ports along the East and Gulf coasts could stoke prices for food, autos and a host of other consumer goods but is expected to cause only modest broader impacts CNBC
"Apple, fresh off the release of the iPhone 16, is preparing to announce a new low-end phone early next year alongside upgraded iPads. Bloomberg
"China’s outbound investment is surging from already-record levels, government data shows FT
Politics/Geopolitics:
See above
Data on Deck: Unemployment
MONDAY, SEPT. 30 Chicago Business Barometer (PMI)
TUESDAY, OCT. S&P final U.S. manufacturing PMI
WEDNESDAY, OCT. 2 ADP employment
THURSDAY, OCT. 3 S&P final U.S. services PMI
FRIDAY, OCT. 4 U.S. employment report1
FINAL MARKET CHECK
Premium: Deep Dive Oil Geopolitics
Includes current technical charts
