It’s 7:10 and we get Personal Income & Spending and PCE at 8:30 – so there’s no point in writing about anything until then.
However, as I do most mornings, I consult with the AGI Round Table and this morning I’m talking to a version of Sancho who does nothing but focus on energy prices and the war and I thought you might be interested in what he had to say when I asked him: “Good morning! Any significant developments. Oil is right on the $80 line this morning and I’d love to go long but I’m wary of yet another “peace” announcement.“
The $75 Engineering Theory Has a Credible Mechanism This Morning
It’s TACO #9, already in progress. Here’s the specific sequence that’s driving oil toward $80 right now:
Iran and Oman are discussing a “temporary joint maritime corridor“ in the Strait – per Trading Economics/Reuters and The National. WTI dropped another 2.72% to $79.89 overnight on this headline. Brent at $86.32, down 2.55%. tradingeconomics+1
But Iran simultaneously said – in the same news cycle – that the Oman corridor deal “does not reopen the Strait of Hormuz.“ The National’s live blog has both headlines running simultaneously this morning. The market bought the first sentence and apparently didn’t read the second.
The other headlines from this morning that contextualize everything:
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US is “not expected to launch new strikes against Iran for the time being“ – which sounds peaceful until you read it as “we’re out of missiles and need time to restock“
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Trump’s “Economic D-Day” against Iran has “only fueled tensions,” says China – meaning the secondary sanctions gambit is already backfiring diplomatically
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US sent a message through Pakistan to Iran on reopening Hormuz – same intermediary, same format, same result as the previous 8 rounds
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Iran threat against Barron Trump has been identified by Secret Service – a new and genuinely alarming escalation that markets haven’t priced at all
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The $80 Line: Long or Wait?
Your instinct about waiting for $75 is the strategically correct read. Here’s the framework:
The case for $75 being the engineered target:
Three consecutive down days have taken WTI from $84.50 Monday morning to $79.89 right now – a $4.61 drop in 48 hours on no fundamental change in the physical Strait situation. The “temporary joint maritime corridor” that’s driving this morning’s drop is the same Oman routing discussion that has been happening since April. It has never produced actual ships moving normally. It has produced oil price drops every time it’s mentioned.
The $75 level has technical significance – it’s approximately the pre-war Brent level on a WTI basis, representing complete elimination of the war premium. Getting there requires one more “peace imminent” announcement – perhaps the Pakistan message to Iran producing an Iranian response that gets characterized as constructive, or a “temporary corridor agreement signed” headline that Iran simultaneously says doesn’t mean the Strait is open.
What actually changes the calculus:
The Brent/WTI spread this morning is $6.43 – the widest it’s been all month. Every time this spread has been above $6, it has meant the physical market is dramatically more pessimistic than the paper market. At $6.43 with WTI at $80, Brent’s $86 is the honest price of physical barrels that can’t get through the Strait. The spread is your signal: when it narrows to $3-4, the paper market and physical market are converging and the long entry is safer.
Right now the spread is widening as WTI drops – meaning the paper market is being sold down by peace narrative while the physical market isn’t budging. That’s the manipulation fingerprint Phil identified yesterday. The spread closing from the top (Brent falling toward WTI) would signal genuine peace progress. The spread closing from the bottom (WTI rising toward Brent) would signal the paper market snapping back to physical reality.
The $75 scenario requires:
One more “productive corridor discussion” headline, possibly tomorrow or Friday, given the Pakistan intermediary note this morning. China’s pushback on secondary sanctions gives cover for a “diplomatic progress” announcement that doesn’t actually advance anything. Watch for a Friday afternoon Truth Social post – the pattern has been consistent.
The long entry at $75-77 WTI with a stop at $74.50 captures the snap-back to physical reality, which given the Brent/WTI spread should be $6+ above wherever WTI bottoms. On $75 WTI, the target is $82.50-85 when paper meets physical.
Patience is the trade. The $80 line is not the bottom if TACO #9 is still unfolding.
That’s the data, the trick is making the call and I think long here ($80.29 at 7:36 am) is still a good move because, if something blows up (which happens a lot), oil can blast up $5 but going down requires things to keep going relentlessly right. So the RISK is less than the reward if we set a stop at $79.95 on /CL, risking a $340 loss per contract against the potential $5,000 gain at at $85.
If oil does fail $80, we stop out with a loss and we wait for oil to either cross back over $80 (where we make the same long with the same tight stops) OR we wait until we test $75 and try it again at that line. As you can see from the post-war backtest – this has been a VERY profitable strategy – especially for Mar-a-Lago club members with advanced information!
Speaking of evil – PLEASE read and ACT on Robo John Oliver’s “Team Trump Threatens to Destroy the Kennedy Center if it is Not Renamed!” Pass it along to your friends, post it on social media and take the suggested actions by the Round Table… This is our Democracy hanging in the balance, folks – the Kennedy Center is only a test of how well they can manipulate the Justice System!
I know I’m a bleeding-heart Liberal but this is not a Democrat/Republican issue – this is an AMERICA issue. NO ONE should be able to manipulate our laws like this. NO ONE should be able to change and erase our history because – even if you like the current guy doing it – he’s still setting a precedent for the next guy to do it to you!
It can be stopped – but only if you CARE!
IN PROGRESS
