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Structural crude outlook update. Also: the equity market faces bigger hurdles now.
Summary: Today we make a structural, if patient call on the direction of crude oil from here, while also looking at the situation for European natural gas heading into the winter. Also, while stocks staged a decent comeback from the lows yesterday, we note some potential headwinds that could keep volatility high, with or without a US government shutdown next Wednesday. A preview of upcoming earnings and macro event risks and much more also on today's pod, which features Saxo Head of Commodity Strategy Ole Hansen and Saxo Global Head of Macro Strategy John J. Hardy.
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Today’s Links
Here is a long-form conversation with Saxo’s Ole Hansen and Kitco on the outlook for copper, precious metals and crude. Hussman Funds latest commentary (yes, bearish based on insanely stretched valuations relative to history). Still, always worth reading. Stratechery weighs in on the Nvidia-OpenAI deal, but also looks at Google’s YouTube as a critical part of its potential, far more so than they previously appreciated. Nassim Taleb weighs in on the simple topic of The World in Which We Live. He is one of the most important thinkers of our time - firmly recommend his entire opus. David Einhorn weighs in on the risk that much of the AI data center capex will end up destroying enormous amounts of capital. You can track the odds of a US government shutdown down to the wire here. Below is a chart of the unadjusted WTI crude oil price (blue) and the WTI price (coral) deflated with the official US CPI index (index 100 was mid-1983, so this is in mid-1983 dollar terms). This reveals that the “real” price of WTI crude at present is near its lowest, ex pandemic, since the pre-2000 era. What is more remarkable, perhaps, is the the forward price isn’t far lower still, as the market apparently sees even lower real prices going forward. A hedger can secure December 2028 crude oil for USD 63.3 per barrel today. Assuming just 2% CPI for the next three years, that is well below USD 60 per barrel in today’s US dollars, or about 59.50 per barrel. Compared that to the prompt November 2025 contract that trades today at USD 65.15. Crude oil is very cheap and priced to get ever cheaper. How can this encourage sufficient supply when so much investment is needed just to maintain current production levels?Chart of the Day - CPI-adjusted WTI Crude
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