Pro Perspectives 4/18/24





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April 18, 2024

Stocks put in another lower low today, in this recent correction.
And it appears that the weight of geopolitical uncertainty will remain through the weekend, which should continue to weigh on stocks.
Let's take a look at oil … 
When Israel struck the Iranian consulate in Syria on April 1, oil broke this big trendline from the $130 highs of two years ago. 
It topped out last Friday, prior to the retaliatory attack from Iran over the weekend.  And even with the threat of escalation, the price has (strangely) fallen as much as 7% this week. 
With the Middle East on a "knife-edge" (in the words of the UN Chief), the price of oil isn't reflecting the supply disruption risk — certainly not supply shock risk. 
Add to this, one of the best research-driven commodities analyst teams of the past three decades (Leigh Goehring and Adam Rozencwajg) have recently drawn attention to what they believe are overstated U.S. oil production data. 
They think the new EIA Administrator's restatement of data, in the middle of last year, to account for a new "adjustment factor" resulted in overstating crude growth by 40%.  Moreover, they see risk of U.S. production growth turning negative in the coming reporting months.  
That would put OPEC+ back in the driver's seat to determine oil prices.  And higher prices serve their interest.