Oil's (Very) Dangerous Situation

This is a free preview of a paid episode. To hear more, visit vblgoldfix.substack.comHousekeeping: Good Morning. “The Gold reset is a process, not an event”Today:* Analysis: Oil’s Current Situation* Premium 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+ SolidarityIsrael Says Likely to Target Oil FacilitiesIsrael'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 pricesTerm structure indicates some unnatural deferred hedging* OPEC solidarity is starting to slightly fray publiclyFor 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: 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 FTPolitics/Geopolitics: See aboveData 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 reportFINAL MARKET CHECKPremium: Deep Dive Oil GeopoliticsIncludes current technical charts