A Geopolitical Take From A Tourist
I am not a geopolitical expert. I am so much of a tourist on this topic, it's probably best you don't read this piece. However, I will just offer you some of my observations from the years I've followed the oil market and what geopolitics typically do for your energy investments in terms of timing.
Hint: It's always best to sell when everyone thinks the world is going to end (from war).
Aside from the obvious signals on "when" to sell, what's not obvious is whether or not energy investors should take some events seriously and some events not so seriously.
In April, for example, we pointed out repeatedly that 1) oil market fundamentals were deteriorating and 2) geopolitical risk was like the donkey with the carrot. In that case, if geopolitical risks fail to live up to "expectations", that's when oil bulls get severely disappointed.
What about today?
There's a bit of irony with the oil market today. For starters, nothing is priced in. Speculator positioning is at an all-time low, money managers shorted diesel and Brent, and sentiment is not talking about the possibility of $100 oil like it was in April. Instead, it feels like everyone thinks $50/bbl oil is inevitable. Given the choice between $100/bbl or $50/bbl, journalists like Javier Blas is willing to stake that it's more likely to go to $50/bbl. If that's not a signal of the obvious (sentiment), then I don't know what is.
With the backdrop of the setup explained, this is what makes today's geopolitical events between Israel and Iran so interesting.