It is odd how Donald Trump found time to visit Graceland yesterday amid the carnage he created. Maybe he really does think he is the new King of rock ‘n’ roll. For the rest of us we are stuck in the mud and await the next bout of conflict, which is not where warcraft might land, but the completely different words and announcements regarding a ceasefire in the Middle East.
Probably even for oil industry veterans, last week’s events and developments exceeded the definition of “unprecedented.” Geopolitical upheavals or wars around oil-producing regions or major energy hubs have always precipitated wild swings. Yet observing May/June WTI dropping more than a dollar in less than three hours last Wednesday, or the May WTI/Brent arbitrage collapsing by over $10/bbl in less than a day—only to rally by $8/bbl in the ensuing six hours—is beyond what can be explained away by anxiety or fear.
Although it is beyond human comprehension what exactly is happening in the Middle East or what the endgame will be, it seems that the potentates of major central banks are aligned in their views. Rising energy costs will result in renewed inflationary pressures. It is no coincidence that the Federal Reserve, the Bank of Canada, the Bank of Japan, the Swiss National Bank, the Bank of England, and the European Central Bank have all decided to leave interest rates unchanged, and that China’s benchmark lending rates have remained unchanged for ten successive months.
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