Part 2: TerraManta invites the reader to be the judge.
The price of crude oil is in the price of everything. Everything will cost more if crude oil prices increase.
Returning to March 2023
On March 16, 2023, TerraManta published a blog post titled Will Inflation Persist.
The WTI Front Month contract decreased from about $80 / barrel (mid January 2023) to $68 / barrel (mid March 2023).
At that time, TerraManta suggested that crude oil prices would increase.
TerraManta continuously learns and manages tens of thousands indicators about major commodities which we call 3-Way-Learning Relationships.
The number of 3-Way-Learning-Relationships is always growing.
The number of 3-Way-Learning-Relationships is always growing. Akways.
Did crude oil prices increase?
In a word - yes.
WTI Front Month contract is now $90 per barrel
This represent a 33% per barrel increase from mid March 2023.
Where do you think oil prices are heading?
The reason why California gasoline prices are high
The reason is entirely simple, despite the rhetoric to the contrary.
That's right. Simple.
California requires a more expensive summer blend which is produced by in-state refineries. The State of California is a gasoline island with no major interstate pipelines, leaving it reliant primarily on in-state production and more costly trucks and tankers. At the same time, the number of refineries producing gasoline has dropped to 10 from almost 50 a few decades ago. Imagine if California congressional delegation proposed ONE gasoline blend for the entire nation so any refinery could ship gasoline to California when the local refineries are down for maintenance? That would be a much better use of their time.
If California voters exercised their right to vote with a broader and better informed perspective, gasoline prices would be lower.
Diesel fuel fuels the economy
Saudi Arabia and Russia indicated that they would extend their oil supply cuts until the end of the year.
While the decision was hardly unexpected, the length of the extension was a surprise.
Last year, as oil and fuel prices increased as a result of U.S. and EU sanctions on Russia for its invasion of Ukraine, the U.S. administration sold close to 200 million barrels of crude oil from the Strategic Petroleum Reserve (or SPR) to contain the rally.
The Strategic Petroleum Reserve is now at a 40-year low.
What even more important: diesel prices are up 40% since May 2023. Saudi crude oil provides a higher yield for diesel than lighter crude oils. Less Saudi oil - less diesel being refined.
Diesel fuel literally fuels the entire economy.
There are only a few other countries - other than Saudi Arabia - which can supply the heavy crude needed by US refineries to produce more diesel: Russia, Venezuela, Iran, and Canada. Canada is the only country on this list which is not sanctioned.
What country benefits from higher oil prices?
As always, TerraManta invites the reader to make their own conclusions.
Strategic Petroleum Reserve is now at a 40-year low.
Diesel is up 40%.
Inflation will continue to increase.
Inflation will become the most important topic in the upcoming U.S. Presidential elections.
Countries which are pre-occupied by internal issues such as inflation tend to change their foreign policies. The U.S. is no exception.
What country wants the U.S. to change its foreign policy in Europe more than any other country?
Revisiting an earlier comment: both Saudi Arabia and Russia indicated that they would extend their oil supply cuts until the end of the year.
It is not Saudi Arabia.
Commodities ran, run, and will run the world
TerraManta is the only company which applies machine learning to forecast commodity prices by continuously learning how geopolitical events influence fundamentals (supply, demand) and result in a price action as evidenced by markets behavior.
TerraManta welcomes serious inquiries from investors who want to see machine learning solve real problems in today's world.