JPM’s latest oil report is going viral on X today following a post by my friend, Eric Nuttall.
And in case anyone forgot, sell-side firms like JPM, Goldman, and Morgan Stanley have all been modeling a normal traffic scenario for the Strait of Hormuz by X date. But as I sat there reading their reports for the past 6 months, I couldn’t help but think: how the hell do you do this analysis without figuring out who wins this war?
I mean, it was literally last week that I wrote my WCTW piece titled “This Cannot Be That Obvious,” where I ripped into Goldman Sachs:
But the purpose of this WCTW is not to berate Goldman, although I would love to spend more time picking apart their analysis. No, the point of this article is to remind everyone that we are no longer in the same oil market environment as before.
To assume that production will gradually recover because of some mystic force that can guide stability in the region, or that the conflict will just magically subside, is both wishful thinking and stupidity.
Who remembers Goldman’s brazen analysis calling for the Strait of Hormuz to normalize by the second week of April, the end of May, the middle of June, and lastly, the end of July?
Yes, I remember every one of those, and the mistake here isn’t that Goldman isn’t intelligent. No, it’s that it knows very well that if it prefaces the analysis with the simple question, “How does the Iran/US war end?” It has to write a piece on how we are all really screwed.
And sadly, if Goldman did that, the Trump administration would breathe fire down its neck. So for better or worse, it can’t do the very thing it should be doing: providing objective, unbiased, and intelligent analysis to the investment community.
Then again, when has Goldman ever done that? (Ha)
So as I sit here, reading through these sell-side reports that sound like nothing but propaganda, I am energized to remind everyone: the oil market isn’t going back to the way it was.
You see, the big problem with me, and it has been for a very long time, is that I am sometimes too ahead of the crowd. And as everyone in the markets knows, being early is the same as being wrong.
From the start of this conflict, I looked at all the geopolitical variables, and I knew that with each passing day without a diplomatic resolution, the probability of one goes down. And in June, despite the US signing the MOU with Iran, the agreement was so one-sided (favored for Iran) that I knew it was unsustainable.
It was obvious to me, but not to a lot of people.
Fast-forwarding to today, most energy analysts are now looking at today’s oil market and wondering: how the hell will this get resolved?
Yes, that’s been my point all along. But just as the crowd gets confused about how it all ends, I am starting to see an endgame scenario develop. I just have to keep in mind that I will probably be early again, so from a trading perspective, I won’t act on it.