Lau here. I’m on the road again, so I’ll keep this one short.
With half of Europe still on fire and mayhem in the streets, I’m heading north to Finland. As it happens, it’s one of the few corners of the continent where life still feels reassuringly normal.
It’s part work and part pleasure. I’m hoping to get out to a mining project or two while I’m here, and if I see anything worth your attention, you’ll hear about it.
Last week was a busy one, which is also why there was no letter on Monday. On Sunday, I sent out the October issue on oil, and I think it might be the most important thing I’ve published this year.
(If you liked the two pieces on how China spent the spring and summer quietly absorbing the biggest oil supply shock in history, here and here, do yourself a favor and read this one.)
I won’t rehash it all here, but suffice it to say the oil market is being squeezed from multiple sides at once. The fighting now stretches from the Strait of Hormuz to another chokepoint on the opposite side of the Arabian Peninsula, one of the world’s most important oil regions. Asia’s usual supply routes are being choked off, forcing replacement barrels onto longer, more expensive voyages.
Meanwhile, nations around the world are burning through reserves that are already at lows not seen in decades.
Worse, China itself seems to have thrown in the towel on its role as the world’s shock absorber. After quietly cutting its purchases by 4.9 million barrels a day, to roughly 7.1 million in June, the world’s biggest oil importer is now back in the market. Month after month, its imports are climbing back toward pre-war levels (taking more barrels off the table for everyone else).
In short, the oil apocalypse China postponed now looks much harder to avoid.
But as you know, every crisis carries an opportunity, and this one is no exception. That’s why I worked to get this month’s issue to you earlier than usual.
As it happens, we didn’t have to wait long for the case I laid out in the issue to get stronger. Just yesterday, Reuters reported that Chinese crude imports are tracking above 10 million barrels a day this month, the highest since March. In the issue, I showed you three consecutive monthly increases, ending at 9.03 million in September. Now we’re on track for a fourth. Take a look at the chart below.
In simple terms: China is putting demand back into a market that was already short of oil. That means more competition for the available barrels, just as the fighting is making them harder and more expensive to deliver.
Meanwhile, the Houthis, the guys in sandals I write about at length in the issue, claimed six separate attacks on Monday against Saudi targets, including Aramco facilities and the airport in Riyadh. Close to half the airport’s departures were canceled that day. By Tuesday, Brent crude, the global benchmark for oil prices, was at $111 a barrel, a five-month high.
The issue walks through all of it, and ends with a way to take advantage of it: an oil producer loading barrels on a coast nobody is shooting at.
It’s linked below, along with the other pieces from last week.
October Issue: The Oil Apocalypse Is Back On
Do you remember the oil shock that never materialized? The one China quietly canceled a couple of months ago?
Trump’s Diesel Deal Is a Drop in a $200 Barrel
Yesterday I had a friend over. He’s American, in town for a couple of weeks, and at some point, as happens these days, the conversation turned to diesel.
From the Comments
One of the things I’ve come to appreciate most about writing here is the conversation that happens in the comments. Here are six that stood out last week, for different reasons. Each one links back to the piece it appeared on, so you can click through if you’re interested in the context.
Thanks again to everyone who left a comment last week. I read all of them, even the ones I don’t get a chance to reply to individually. Over the coming days, I’ll try to catch up on the questions and the longer threads.
Regards,
Lau Vegys
Finland, and mining opportunities to consider. I'm looking forward to what you have to share, and thanks for doubling down on China the spunge is back and your last recommendation is clearly all the more in the sun of likely high success, well positioned in terms of geopolitics and chokepoints. Right on. Got the family with you? Hope so. Or at least in a safe spot. Europe, old / wild Europe, on fire again, this time like so often earlier, not the "climate" but the emotions sparked from so much has gone/is going wrong. There's a lot of finger pointing and rock throwing. But, I think, that point should come back on the self, the individual, who can build up cooperation instead of tearing down what's already falling of its own weight, i.e. the state. Stand back. Combine strengths in your own neighborhood. Care about each other. We're all in this together. Cheers, Lau. Keep up the good work.