Quotes of the Day

On top of what I mentioned in last weekend's commentary,

"We maintain that a Mid-East resolution coming soon would likely give quite the boost to animal spirits, one that markets would initially cheer... The underlying inflation dynamic, however -- being a structural affair in our view -- will no doubt keep us on our toes going forward."

-- key phrase being "inflation being a structural affair," -- the following from Exxon's earnings call this week bolsters our view (HT Peter Boockvar):   emphasis mine...

 “So I think it’s obvious to most that if you look at the unprecedented disruption and the world’s supply of oil and natural gas, the market hasn’t seen the full impact of that yet. And you only have to look at the ranges that oil prices have moved at, which are very consistent with the last 10 years versus historically unprecedented disruption. So there’s more to come if the Strait remains closed.”

“Why haven’t we seen those impacts manifest themselves fully in the market yet? Well, I think we all know there was a lot of oil in transit on the water, a lot of inventory on the water that has been deployed in the first month of the conflict. Strategic petroleum reserves have been released. Commercial inventories have been drawn down. And so we’ve seen that play itself off and mitigate the impact as we move through March and then here through April.” “As you get to kind of minimum working levels of inventory on the commercial side, you’re going to lose one of these sources of supply. And so we anticipate as that happens and the Strait remains closed, that we will continue to see increased prices in the marketplace.” “Once the Strait opens back up again, it’ll take some time for, frankly, to get back to a stable flow rate that was consistent with what we’ve historically seen. Ships got to reposition themselves. We’ve got to work through the backlog. Then there’s obviously the transit time to get the product to market. And so we’re thinking there’s going to be a one to two month time lag between the Strait opening up and the market seeing normal flow.” “And then depending on how long this goes and how far strategic petroleum reserves are drawn, how low commercial inventories go, there will be a period of time where players, markets, governments, countries try to refill and replenish those inventories. And so that’s going to bring an additional level of demand into the marketplace, which we think is going to put upward pressure on prices. I would also anticipate that many countries around the world will look at if they don’t have strategic petroleum reserves, start thinking about whether they need those. That may bring some additional demand into the marketplace.” Something I’ve been arguing. “And then obviously people are going to reassess their energy security and how they ensure that going forward that they don’t have the same exposure that many of them have realized here in the short term.”