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The chart below is the short interest in Exxon Mobile stock. Now is the highest short interest in Exxon Mobile stock in the last 10 years. Could there be a short squeeze coming in this stock and the overall oil market?
So right now China is experiencing a big slow down in the real estate market. This slow down is thought to have effects such as deflationary pressures creating an argument for lower prices in the oil market.
I think there is certainly a possibility that the US sees a similar trend in commercial real estate because of the new reality of work from home. Companies just don't need the office space they did before covid. Could real estate in the two largest economies set up deflation in other markets such as oil?
Comparing residential real estate in China to commercial real estate in the US is comparing apples to oranges. Chinese have/had a larger portion of wealth stored in real estate. With the drop in real estate prices, it's impacted the wealth of a large number of citizens...making them feel poorer. This seems to have led to a drop in oil demand, coupled with some harsh covid lockdowns. There's more factors than just real estate.
In the US, much of the commercial real estate will be held by corporations. If commercial real estate prices drop, it won't have the same wealth effect impacts to the average Joe...unless it triggers a recession. Any demand destruction from the work from home trend has already been realized and priced in a long time ago.
Oil is in "buy on dip" mode, trending higher. There's no reason not to have a long bias at present.
Should be interesting to get some guidance on possible rate decisions by the Fed tomorrow. Very possible to see a melt up in crude prices into the mid 80s going into spring if rate cuts are on the table.
I think the Fed will be doing most of the heavy lifting as far as firming up prices in crude. OPEC supply cuts from months ago now background noise. Unless some really weak, unexpected data comes out of Asia crude should move up.
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Fed Funds futures saying no rate cut till May. Of course they could be wrong!
March ~ 94.6725 = 5.3275%
April ~ 94.6725 = 5.3275%
May ~ 94.6925 = 5.3075%
(Settles against the monthly average of the Fed Funds Rate for that month.)
