Yves here. I had said I would not post on the Iran war today but I feel compelled to offer some low-effort clarification. I had expressed mystification that the US officials could seem so completely chill about the implications of the continued choking of the Strait of Hormuz, as manifested by how they are ignoring the Memorandum of Understanding (MOU) save on provisions that get more oil to the market, even if Iranian. Not only is the US engaged in stonewalling in the form of refusing on to budge in its interpretation of limits on how Iran spends the $6 billion in frozen assets set for release in a 2023 Biden agreement and moving more men and material near Iran (this was an Iranian complaint to Qatar and not a mere Twitter rumor).
That had suggested to me that there must be some unobserved factor(s) influencing the US posture. I had speculated that perhaps even the low-compared-to the-old-normal energy flows out of the were still sufficient for the US to have a hope of eroding the oil cliff. Philip Pilkington not only decisively debunks that idea but explains why so much of the bizarre behavior, of paper oil prices being wildly out of whack with real world supply and demand. Pilkington unpacks the role of algorithmic trading: how they react to the obsessively cheery takes from the business and popular press (recall my regular criticism of Bloomberg in this regard), how the algos give weight to beginning-of-the-week positions, which enables traders to manipulate markets, and how the algos operate on momentum on top of that.
The advantage of having fewer information entries is you can spend more time on the ones provided. This segment with Mario Nawfal is a must watch. For those who are not big on videos or podcasts, you can find a machine-generated transcript here.
Long-standing readers may recall that we were early to feature Philip. He wrote for Naked Capitalism regularly in 2012 to 2014, before he went to the well-regarded fund GMO (we like to think his work here helped advance his career). He focused on bad mainstream economic ideas and how they showed up in misguided policies, often using Paul Krugman and Thomas Piketty as object lessons.
Reader DD GE pointed to an important Nate Wade post that we had managed to miss: Better Flows Were Clearing a Backlog, Not a Recovery. It addresses one of our questions: whether the tankers coming into the Gulf and being loaded with oil (as opposed to full tankers that had been trapped getting out) was getting to a level that could amount to meaningful relief. Wade’s reading is decisively not, based not just on transits but an unsentimental look at the state of play and trajectories. Key parts from his important article, starting with his overview:
The ceasefire holds, but the underlying deal has stalled on the points that determine whether reopening is sustainable.
Iran is entrenching control over the strait through mechanisms – mines, fees – that outlast any ceasefire.
Iran’s institutions can’t agree among themselves, so even a signed deal still may not compel the IRGC, hence the physical reopening the market is pricing isn’t coming on the MOU’s own timetable.
Meanwhile the price is being held down by three cushions – released barrels that had been trapped in the Gulf, SPR drawdowns, and Chinese reserves and reduced imports – that are all finite, so the mispricing identified in Two Spikes Coming hasn’t resolved.
New evidence this week – inbound tanker numbers, floating storage, operator testimony – confirms the physical picture rather than the price picture.
However, note that despite almost daily announcements by Iran that it is in control of the Strait of Hormuz and Oman side transits are therefore supposedly not on, they have been more on the Oman side than the Iran side:
The tankers are smart, they are using the funeral to go back in through the Oman route. https://t.co/XGG0sxf1I5 pic.twitter.com/82RCvD3GSC
— HFI Research (@HFI_Research) July 3, 2026
The detail:
Later in Wade’s post:
Roughly 170 million barrels of crude that had been trapped in the Gulf cleared the market once the MOU allowed it out. The SPR is drawing at a pace that leaves perhaps three to six weeks of room. Chinese crude imports have fallen by something like 5 mb/d since March, while China’s visible commercial stocks have barely moved, which means the shortfall is being met from reserves that do not appear in any published series. Cushing itself fell to 18.96 million barrels in the week to 19 June, the lowest since October 2014 and near the roughly 20 million barrels traders treat as an operational floor. A partial reopening of the strait does not fix that on its own.
Mind you, the level at Cushing has recovered a bit to 19.666 million barrels, but there is no reason to think improvement will continue.
An informational issue: Wade wonder if the $12 billion in Iranian frozen assets that Pezeshkian has been talking up have in fact been conveyed to Iran. As we have discussed long form, no. The US and Iran are still arguing over an aforementioned $6 billion and the other part has not yet been addressed.
And the US has admitted it has a wee fertilizer problem:
DECLARATION OF EMERGENCY AND AUTHORIZATION FOR TEMPORARY DUTY FREE IMPORTATION OF PHOSPHATE FERTILIZER FROM MOROCCOhttps://t.co/fouqFzMcFv
— U.S. State Dept – Near Eastern Affairs (@StateDept_NEA) June 30, 2026
You may see the headline as being hyperbolic in light of the tariff waiver applying (so far) only to Morocco, but we were not the one to use the “emergency” word.
See you (assuming a festive and no-kinetic-development weekend) Monday!
> I had said I would not post on the Iran war today but I feel compelled to offer some low-effort clarification.
It’s like the more you give, the more I want
Old school.
Thanks for that transcript link for the Philip Pilkington interview. Just when you think that it cannot get any worse – it does. So you have these stock market AIs make their ‘decisions’ based on what is in the news. The same news that is nearly all controlled by six corporations. Then when these AIs help push down the price of paper oil, the same media will tell you ‘See? Nothing to worry about.’
If China is letting out their oil to world markets like Philip Pilkington says, I am not sure what the Trump promised in return. Taiwan? Maybe but that would be depending on the strength of Trump promise which ain’t worth ****. More likely they do not want their customers to become impoverished as then they would not be able to buy stuff off China.
>> ” One of the first places to implement AI models were the financial markets. And it’s obvious why. If you can get an edge, you can make billions of dollars, right? So So the financial markets implemented AI really early on.
>> And what they found was they were only really good for text recognition. They were really good for going through news articles, financial statements by companies, financial reports by oil producers, this kind of stuff, and picking out keywords.”
But dedicated AI models can be good with numbers. Finance uses numbers. That AI models failed to keep up with Trump torque-wrenching the timing chain on the markets sez a lot. ‘The business of Wall Street is inside information.’
But until the futures are close to expiration, they’re perfectly liquid, at least for big finance AIs, right? There’s no reason for the AIs to respond until they’re right on the cliff edge, and then they’ve got to quickly liquidate before the slower investors can respond?
So all WAI.
Cui bono cui malo?
> so the crack is just showing you literally what the cost that the refineries are eating
So the industry is quietly eating the loss to keep the pump price lower. But why China? Janet suggested it’s like roll-back, softly creating the void space for the foe to overextend into. ‘Have another shovel.’
And failed with help from an insider (Bessant) who knows all the tricks and likely has unlimited funds to both push the narrative and push the trades.
But as Pilkington says, “you can’t print oil.”
However looking a few months (or weeks?) ahead, what will become of the broken western financial system? If Pilkington is right, we are at end stage empire, where the players grab all they can and head for the exits.
Then what? Great Depression on steroids do I hear?
“More likely they do not want their customers to become impoverished as then they would not be able to buy stuff off China.”
Indeed. I also said the other day that it’s more like China doesn’t want countries all around them being more destabilized. And whether they are buying something or not, it can create more long term problems.
Aside from the customers, doesn’t China have supply chain inputs that come from other countries?
I find there’s a certain cynicism by market practitioners and free marketers. They understand markets and know how to manipulate them to their advantage (spoofing, collusion, etc), but then love to turn around to the public and preach market dogma by saying, “look, it’s a market price! therefore it has to be legitimate and there’s nothing to see here”. it’s only when volatility shoots up, trades get canceled, exchanges are against the ropes that they suddenly lose their dogmatism.
And demand bailouts for the billionaires.
Maybe that is what’s coming before a Great Depression
I’ll probably be limiting my posting for a while, but this is one more issue where I think people’s priors are obscuring what might be happening.
I’d just ask this: what’s the likelihood that China would give Iran material support in this war (diplomatic, economic, technical incl. ISR) yet not coordinate such a major move in the oil market? At the same time, given America’s well-known narcissism & zombie tendencies, what are the odds Iran planned to close the strait but not for the current scenario?
Combined with Iran’s ideological posture towards the Global South, maybe Iran’s goal in Hormuz has never been to squeeze the global economy until the US yields. So if Iran is throttling flows but only to a point, and they aren’t bluffing, then maybe the goal has always been something else?
The goal has always been for Iran to assert itself as a regional power and enter the global capitalism club.
What does the “fertilizer emergency announcement” for Moroccan phosphate supply have to do with Iran? Fertilizer broadly contains three elements: nitrogen, phosphorus, and potassium. I’m not aware that phosphorus production has anything to do with oil or natural gas, except for digging it out of the ground and transporting it. Nitrogen production, however, depends heavily on natural gas, a lot of which produced by Qatar and Iran.
On a side note, phosphorus supply is expected to have its own problems: “Scientists have reported that global phosphate production would peak around 2030, at the same time the global population will reach 8.5 billion people. Several reports have also warned that the global reserve would be depleted within the next 50 to 100 years.” https://theconversation.com/scientists-work-to-solve-phosphate-shortage-the-dwindling-resource-required-to-grow-food-120390
The industrial production of phosphate fertilizer depends on a steady supply of sulfuric acid. And the supply of sulfuric acid has been disrupted thanks to the Hormuz closure due to desulfurization of sour oil grades being one of the main sources of industrially produced sulfur. In conjunction to this, China has put an export stop to the sulfuric acid it produces, further straining global supply. There was a Craig Tindale article posted on NC that laid it all out.
Systemic Risk: A 12-Order Cascading Analysis of a Zero-Flow Strait of Hormuz Closure
Um, you’re missing the massive role of natural gas in fertilizer production:
and
Refining of oil to produce fuels generates hydrogen as a “waste” product (converting alkanes (single chain hydrocarbons) to alkenes (double bond hydrocarbons) and aromatics (ring-shaped hydrocarbons) releases hydrogen), which becomes a valuable product when it converts atmospheric nitrogen to ammonia which is bioavailable without resorting to fava beans and other legumes (the pre-petroleum approach along with compost).
“Nitrogen is the other basic fertiliser element that plants need. Diammonium phosphate, the most popular type of phosphorus fertiliser worldwide (and which Morocco makes along with monoammonium), is composed of 46% phosphorus and 18% nitrogen. Natural gas accounts for at least 80% of the variable cost of nitrogen fertiliser.” from cited article
Moroccan announcement months in the making! https://www.fertilizerdaily.com/20260608-65-farm-groups-press-commerce-secretary-to-scrap-moroccan-phosphate-duties/
Dap and Map both contain nitrogen https://www.argusmedia.com/en/news-and-insights/latest-market-news/2769637-morocco-s-ocp-sells-dap-map
DAP (diammonium phosphate) and MAP (monoammonium phosphate) both require ammonia and phosphoric acid. The topic of ammonia has already been explained. The way phosphoric acid is industrially produced is by using sulfuric acid on phosphate rock to make the phosphorus soluble. And here is where the supply chain returns to all the sulfur that is being choked off at Hormuz.
https://www.chemcopilot.com/blog/how-is-sulfuric-acid-used-in-the-production-of-fertilizers
OK, I stand corrected–sulphuric acid is needed in the industrial production of phospates. That point is still tangential, because that’s not what the Declaration of Emergency addresses:
It says specifically: “Producers in countries such as the Kingdom of Morocco can supply phosphate fertilizers to the United States without disruption at this time. It is imperative to immediately facilitate importation of phosphate fertilizers from the Kingdom of Morocco to mitigate the significant risk to the agricultural food production of the United States,” (Moroccan production of fertilizer has in fact been disrupted.) https://www.federalregister.gov/documents/2026/07/02/2026-13588/declaration-of-emergency-and-authorization-for-temporary-duty-free-importation-of-phosphate
Trump’s brain trust may not realize that the bottleneck is not the availability of phosphorus per se, which is readily available in mineral form, but rather the availability of natural gas and sulphuric acid which affects availability of nitrogen fertilizer along with other critical products.
It makes you wonder if he has realized the impact on those other critical inputs. My guess is that the policy is somewhat of a lame attempt to benefit fertilizer users (Big Ag) and harms Florida phosphate producers who have been protected by tariffs (i.e. nothing to do with the Persian Gulf policy.)
I am late to this but we posted FROM THE VERY OUTSET of the closure of the Strait of Hormuz , as did many others, that it would produce big reductions in fertilizer supplies and as a result, higher prices. This has been widely reported in the press. So your reaction is baffling.
Yes, closure of the Strait of Hormuz has produced big disruptions in fertilizer supplies…but Trump’s emergency declaration is not evidence of that.
Here’s the back story: “‘The Biden Administration’s phosphate fertilizer duties drove up costs for farmers at a time when they were already facing record-high input prices. Between 2021 and 2025, these duties increased costs by an estimated $6.9 billion, making it even harder for producers to stay competitive,'” said Congresswoman Miller-Meeks.
The legislation is supported by leading agricultural organizations, including the American Farm Bureau Federation, National Corn Growers Association, National Taxpayers Union Foundation,Taxpayers Protection Alliance American Soybean Association, National Association of Wheat Growers, National Cotton Council, Rice USA, and the Iowa Soybean Association.”
https://millermeeks.house.gov/media/press-releases/miller-meeks-leads-charge-lower-fertilizer-costs-iowa-farmers
The declaration is primarily evidence of Trump’s need to placate a powerful domestic constituency in farm country rather than evidence that he’s aware or cares to address serious collateral damage of a general fertilizer disruption. That would require a declaration of an ammonia, urea, and sulphur emergency.
According to El Confidecial Saharaui, it has to do with Cuba rather. It’s rewarding Morocco for having voted along the USA vs Cuba at the UN (nobody else did?)
West Sahara (largely occupied by Morocco but very unstable) holds all the reserves of phosphates anyone will ever need in the Bucraa mines. But it is the only such place on Earth. Potentially the Sahrawi Arab Democratic Republic can get drones like Ansarullah or Hizbollah and bomb Bucraa mines out of operation some day. I can even consider that some day (after things change somewhat) Gibraltar Strait may be blocked in the middle of an enhanced NW African conflict strongly related to this unique mine. All this colonial war and looting has been largely managed under the radar (not just by the USA, France and Spain, China also has been pampering Morocco, what led to Algeria snubbing BRICS) but some day will explode under our noses
One of the key skills in trading is recognizing when an algo is in play. And one of the clues is when movement is not behaving as it should, given reality. And when an algo is in play, the rule is GTFO.
Unless you’re an algo. Then you play and profit by beating the non-algos, right?
> You may see the headline as being hyperbolic in light of the tariff waiver applying (so far) only to Morocco, but we were not the one to use the “emergency” word
Morocco is a big player, it controls over 70% of the rock phosphate deposits in the world.
I very much enjoy Philip’s work, which I first encountered when I purchased his 2016 The Reformation in Economics: A Deconstruction and Reconstruction of Economic Theory
https://www.goodreads.com/book/show/30209839-the-reformation-in-economics
His most recent effort, The Collapse of Global Liberalism: And the Emergence of the Post-liberal World Order is a departure from political economy — I’d characterize it more as political philosophy with some implications for sociology
https://www.goodreads.com/book/show/222935823-the-collapse-of-global-liberalism
He shares a Substack and podcast with Andrew Collingwood that I follow closely, both called “Multipolarity”
https://multipolaritypod.substack.com/about
They’ve really been quite on point over the course of the past few years, and with the exception of getting the recent Hungarian election rather badly wrong their track record has been excellent.
Gas prices here in town are bouncing around quite a bit. One station has 3.09 while another has 3.49. It could be the station owners are as mystified as the rest of us but the first price is at a very big owner (Walmart) and the second a more regional. Here, location in town also makes a difference but rare to see the “spread” so great.
Buddy of mine was a store manager for a very large grocery chain. He said, and this is purely anecdotal, that the way they set their gas prices locally is to have a night manger get in a car, drive around a circuit of nearby gas stations to see what price they are charging. Then make a change that is equivalent or competitive with those prices at their gas station. He swears this is true.
I have no doubt that is true. It’s called collusion and price fixing, and it’s supposed to be illegal (maybe hard to prove in court? or not?) Even driving through my town, it seems obvious that collusion is rampant where most of the stations (except for the always expensive Chevron and Shell) charge the same price. Then further inland the stations all have another set price which is significantly lower. But there seems to be many blind eyes turned and that’s small potatoes compared to the higher level collusion, corruption, price-gouging, bribery, grift, kleptocracy etc. that just increases over time.
Here’s a recent story about price fixing
https://abc7news.com/post/walmart-circle-bp-7-11-among-gas-stations-sued-using-ai-powered-tool-kalibrate-collude-raise-california-prices/19379814/
not sure where you’re located, but perhaps one of those stations is part of the price collusion cartel via software:
https://www.thebignewsletter.com/p/how-do-you-beat-an-oligarchy-one
I believe that story was about California. Of course the take on convenience store stations has always been that they make their profit from the other items they sell and so their motive is high traffic rather than profiting from fuel.
In the past there was also talk of “zones” in cities with different wholesale prices. Here in my SC town one part of town always has the lowest prices and the lowest in it is the Murphy/Walmart station that the other prominent grocery/gas operation more or less matches.
What is intriguing about Philip Pilkington’s take on the manipulation of paper oil contracts is that at the end of the day, the consumer buying gas is paying the crack spread plus the cost per unit of physical crude oil. If the physical product sells at $110 per barrel, and an August 2026 paper future price of oil is $70 per barrel, the fact that the paper future is low has zero impact on what the consumer pays. For propaganda purposes, maybe you can push the fake paper numbers and create a false expectation that help is on the way, but the benefit never arrives. Yes, Hormuz is “re-opened” and gas is down 5% but nothing like the paper market.
“…brutally reprice all of a sudden (likely when gas stations begin to run out of gasoline and diesel that, at that point, will be sold to the highest bidders) JustDario
@DarioCpx 3h
@Mark4XX
CHINA FORFEITS 450 MILLION BARRELS IN ONE MONTH: WHY OIL PRICES ARE CRASHING DESPITE RECORD INVENTORY DRAWS
Eric Nuttall, Senior Portfolio Manager of Ninepoint Energy Strategies, revealed the single biggest reason oil prices have collapsed despite record-low inventories. China quietly slashed its oil imports by 4.9 million barrels per day in June alone, forfeiting nearly 450 million barrels and draining its own hidden stocks. This massive move has temporarily masked the true tightness in the physical market and created one of the largest disconnects between fundamentals and price in decades. The result is oil trading in the high 60s while the real balance sheet screams much higher…
This is the most unexpected story … I haven’t seen any clear explanation for why China would do this. I’m trying to keep an open mind, it may be true. However, we should also consider the possibility that western sources are not able to account correctly. What if some of that deficit is being replaced with Russian oil outside the monitoring eyes of clowns like Scott Bessent?
Assuming that it is at least partially true, the only reason I can think of for China to reduce imports would be to help out neighbors in SE Asia. Goodwill that can be banked and used later to win influence and keep the US away from their sphere of influence.
I’d guess that China would obsess more over what to do with all the things they produce.
Additionally, although it’s still not a pretty picture, countries have found alternate routes and sources for some shipments (products of all kinds, including energy). The difference between that and what isn’t coming from the Strait is the actual shortage number for various shipments. And it varies from country to country.
The resulting high prices from all this is putting economies on the cliff’s edge.
Why is everyone so puzzled by this? It is purely based on price. Think of it from your own standpoint with ground beef and a chest freezer. When ground beef is on sale, you fill up your freezer. When ground beef is expensive, you slow (or stop) your buying and use what’s in your freezer.
The entire point of having stockpiles of commodities is to be able to stock up when it’s cheap and not have to buy when it’s expensive.
Filling your oil reserves at $60 so you don’t have to buy at $100+ is the only explanation needed.
You’re completely correct from a purely economics standpoint. The confusion lies as to why China – the same country that has been helping Iran considerably both overtly and covertly – would do this *now*, at this very particular moment with the MoU period on.
In the immediate term, it substantially reduces Iran’s leverage over the US, which could unduly increase the US’s confidence, and therefore potentially lead to further war and disruptions in the longer term, up to and including the total destruction of fossil fuel infrastructure throughout the Middle East if the US and Israel decide to start hitting Iranian fossil fuel infrastructure. Therefore, from the pro-Iran perspective, you’re looking at China and wondering if these actions aren’t them saying to Iran: “I’m sorry, we’re sick of this conflict. Make a goddamn deal with the US. Now. With reduced oil prices, we both know the US will be tempted to try a military solution again if you don’t make a deal.”
0643 PDT
Syria rules out military intervention in Lebanon despite US pressure
https://www.france24.com/en/middle-east/20260703-syria-rules-out-military-intervention-in-lebanon-despite-us-pressure
‘Political systems cannot sustain it’: Turkish FM calls for sanctions on Israel, Sa’ar retaliates
https://www.jpost.com/middle-east/article-901311
U.S. warned Iran about Israel’s aims to assassinate leaders
https://www.washingtonpost.com/national-security/2026/07/02/us-warned-iran-about-israels-aims-assassinate-leaders/
NATO plans to replace ageing fleet of U.S.-built AWACS with Swedish Saab GlobalEye jets, after Trump repeatedly criticised European allies for relying on the U.S. for their security, sources say
https://www.reuters.com/business/aerospace-defense/nato-plans-saab-globaleye-jets-replace-awacs-sources-say-2026-07-02/
USAF is working the E-7 a replacement for E-3.
It is 737 based and a lot of similarities to the Boeing aircraft designed for Australian Air Force.
NATO E-3 will be much more difficult to maintain as USAF moves off E-3.
I believe Saab has a competitor for E-7.
The “US warned Iran” about Israeli assassination plot against Aragchi and Ghalibaf.
I remain skeptical of this report, something sounds fishy about it. It appeared in the NYT and other mass media outlets as well
More “good cop, bad cop” posturing?
A couple of weeks ago, the unhinged emperor threatened the Iranian negotiators on his soc media platform as well. Hmm.
Because of the well-deserved decline of approval for the Zionist regime in the US, there appears to have been a shift in the story-line in order to advertise a rift between the US/Israel. Some weeks ago, there was an Axios report of the DT yelling at the Crime Minister of “Israel” and using foul language. Although Larry Johnson said it was likely real, I still don’t buy it. The sources for these claims are a bit dodgy and all too convenient for the WH who wants to distance themselves from the Izzies for domestic political considerations. (with the upcoming”midterms” and all)
But maybe I’m excessively skeptical, or even, cough, cynical?
Take it from me, one cannot be “excessively cynical.”
If the administration were squawking about congressional efforts to increase cooperation to the point of integration between the US and Israeli intelligence and military apparati, then perhaps there might be something to the “rift”. Personally, the way I look at the situation is that the two sides are publicly separating and threatening divorce while continuing to sleep with one another in a sleazy motel.
0650 PDT
Iran nuclear and military damage revealed in restricted satellite images
https://bbc.com/news/articles/cr5j1qn6deno
On the Strait of Hormuz, BBC finds seized ships and shark fishermen as uneasy calm returns
https://www.bbc.com/news/articles/cvg53ngvvpxo
Ok, so I’m listening to the Nawfal-Pilkington Youtube discussion, and…
1. I am completely boggled by the part where they discuss where to find crack spread information. Does no-one have a Bloomber terminal, or is aware of the CRKS Go command, which is the master summary for, I don’t remember how many, a couple of dozen different crack spreads by type and geography? Or of individual Bloomberg crack spread tickers, e.g. CRKS321C for Cushing (https://www.bloomberg.com/quote/CRKS321C:US)?
Hell, forget Bloomberg, the EIA literally publishes the Gulf Coast 3-2-1 crack on its daily price page (https://www.eia.gov/todayinenergy/prices.php). Yes, technically independent shops like RBN Energy have a slightly different read of it (https://rbnenergy.com/market-data/3-2-1-crack-spread), but it’s within a couple of dollars. And yes, maybe Pilkington is looking for info on, I don’t know, Singapore, and I haven’t a clue whether Bloomberg has that data (and haven’t touched a terminal in years, so cannot check).
Still. I remain completely boggled. “Is this information public?” YES!!!
2. More on point. So let’s take the EIA data for the 3-2-1 at Gulf Coast, which is at $58.12 as of July 1 close. So that’s 3 barrels of crude make 2 barrels (42*2 gallons) of wholesale gasoline at $2.99 a gallon, and 1 barrel (42 gallons) of wholesale diesel at $3.23 a gallon, again using Gulf Coast prices from the same source. Just to keep things simple. Let x be the implied price per barrel of oil.
58.12 = 2*(42*2.99) + 1*(42*3.23) – 3*x
3*x = 2*(42*2.99) + 1*(42*3.23) – 58.12
3*x = 251.16 + 135.66 – 58.12
3*x = 328.70
x = $109.57
Unless my cheap little solar powered calculator has betrayed me, or unless it’s too early in the morning for me to attempt solving linear equations, that’s the implied oil price paid by 3-2-1 Gulf Coast refineries based on product prices and crack spreads. I’d really want to run the stuff for the 2-1-1 refineries (that’s the heavy oil stuff), and for a few more regions, but there you are.
Which matches what Pilkington is saying – he gives a $105-$115 range or so – but then at some point he seems to imply that to get there he had to run a regression on…something? That whole part of the discussion made it seem like the matter is more complicated than it actually is, from where I sit. Maybe because Pilkington is trying to get them for Europe and Asia, where the data is more nebulous?
3. I wonder about timing issues.
I’m not disputing Pilkington’s thesis about algo trading, market not-at-all-manipulation, the disconnect between paper and physical prices, all that. I get it. But.
The oil that a refinery in, wherever, China, is refining today, would have been oil purchased 2-3 weeks ago – or some period of time ago – at a price in effect then, and delivered only now. Gulf Coast 3-2-1 in theory shouldn’t have nearly as much of a lag, but still. If – suppose – there is no further escalation in the Gulf, or any other exigent events, should we not see a decline in the implied price for refiners by the end of July, when the barrels purchased today at today’s spot price are delivered and processed? Or let me reframe that – by the end of July we should see what the real effects on spot physical prices, if any, there have been from the post-MoU traffic through the Strait and the concomitant effects on the oil markets. Maybe I should set up a little spreadsheet feeding from that EIA daily page…
Please indulge me. If you click through and read it in full, you will see it is on point re your regression issue:
Ha!!!
Re Math files: absolutely hilarious!!!
(click on the date to read in full)
Ha! Sorta reminds me of the story about a bulk hauler ship ie time constraints/penalties/dock fees with an engine its own engineers could not fix. Fearing a need to dry dock and strip it down, potential months, they brought in a engineer with a long life of hands on experience. Brings a bag of tools, picks out a hammer, spends a few hours hitting various parts whilst listening to the sound they make, eventually he stops and tells everyone this part is defective and needs to be replaced. Sure enough after its replaced the engine starts up and operates normally, disaster is avoided, 100s of thousands in costs/loss of income.
The engineer submits a bill for 25K, management blinks, how could you substantiate such a bill for not even a days work. He replies … ***you are not paying for my hours on the job*** … you are paying for decades of hard won knowledge/expertise … what size/weight of hammer too use … where to hit with it, and what sound it should make. Otherwise I could be like others and suggest a full strip/breakdown of the engine, spec everything until the fault is found, bill would be manifold bigger and you all lose huge amounts of time and money. They payed the bill.
Hence why I love my work so much. Houses that have provided shelter for families since, in some cases, early 1900s, and will continue for a long time if maintained. I give it another 25yrs+ in protection, work done next time will be a much simpler job, aesthetics that is better than ever before [in one case a women 70 odd yrs old living on the same street her whole life said its the best the place ever looked]. All whilst getting to know the diverse clientele in age/profession – medical, business, PhDs [2 notable Philosophy of Science types], tech, financial, and having some very interesting chats about things.
Case in point. My currant job is for a bloke/wife where he did his printing apprenticeship with Kodak, was there till the end, retrenched and now runs his own label business at about 60 yrs old. Lmmao she is eyeball deep in banking all her life, fun chats about all that, noted NC too her, big fluff right now in Oz about the changes in the Capital Gains Tax=RE flippers and rents extractors having a sad. Eh …. Rev Kev
This reminds me of a story about Charles Steinmetz, the technical wizard of General Electric, involving Henry Ford.
from:
https://www.smithsonianmag.com/history/charles-proteus-steinmetz-the-wizard-of-schenectady-51912022/
“Ford, whose electrical engineers couldn’t solve some problems they were having with a gigantic generator, called Steinmetz in to the plant. Upon arriving, Steinmetz rejected all assistance and asked only for a notebook, pencil and cot. According to Scott, Steinmetz listened to the generator and scribbled computations on the notepad for two straight days and nights. On the second night, he asked for a ladder, climbed up the generator and made a chalk mark on its side. Then he told Ford’s skeptical engineers to remove a plate at the mark and replace sixteen windings from the field coil. They did, and the generator performed to perfection.”
“Henry Ford was thrilled until he got an invoice from General Electric in the amount of $10,000. Ford acknowledged Steinmetz’s success but balked at the figure. He asked for an itemized bill.”
“Steinmetz, Scott wrote, responded personally to Ford’s request with the following:”
“Making chalk mark on generator $1.”
“Knowing where to make mark $9,999.”
“Ford paid the bill.”
Smirk … BSD Capital absolutely hates* skilled labour, screws with notions of superiority by dint of marks of tokens in constructing reality around them. Some are savants that way but have no notion of all the manual arts that make it happen, years/decades of building skills that make it all happen-looks at AI et al tech overlords these days …. how many Tbites would AI need and the energy/water to mimic how I work in a day. Set up trestles/planks/ladders and body movement to utilize tools in prep and painting [brush/spray/roll] when every project is a one off and then contend with changing environmental conditions. So much physics and chemistry at play and I am just painting lmmao …
Love to have musk and co on a job site for a good time, I would flog them so hard at 64 yrs old no less … cop that … wankers …
This never grows old!
Nat Gas in its overpriced hey-day was $7-$ 9 per MCF. It is down around $1.75- $1.85 in western Colorado.
Price discovery challenging, and distortion due to commodity “markets” (pronounced Casino) seems amplified these days of “information” at the speed of light.
Safety First, thanks for all that.
I’m an absolute amateur when it comes to the oil markets but given WTI futures is deliverable it didn’t make sense that there could be this sort of huge discrepancy between the “paper” and real world prices for crude. So, I had a look on the EIA site you linked to.
Turns out the crack spread is the per barrel refiner margin between the cost of the crude and the value of the products, not the total margin across the three barrels (in the 3-2-1 crack spread case). That effectively reduces the implied crude purchase cost by roughly US$35/barrel, which eliminates the apparent anomaly.
Doesn’t of course mean the markets aren’t being way too optimistic in assuming everything is going to go smoothly from here on in.
The machine translation of the interview was interesting. Clearly the machine is not yet ready for prime time, though it did, as Yves suggested, work for me as a “not listening to podcasts” type.
But in amongst all the discussion that’s already been hashed and rehashed here regarding shorts and cracks and algos and WTFery writ large, was this interesting bit:
Like I one of my friends who who works in DC um so sometimes says you know it’s the end of Empire and everything like that and uh he says that the the main rule at the end of Empire is to grab everything that’s not nailed down. Kind of feels like that, doesn’t it?
How true. How true.
https://houseofsaud.com/iraq-opec-exit-threat-leaves-saudi-arabia-enforcing-a-cartel-it-cannot-afford-to-defend/
Even though it’s been denied, the Saudis appear to be bracing themselves for Iraq leaving OPEC.
Just thought it was interesting in the context of all the discussion about controlling energy prices.
That seems to favor us, afaik us doesn’t like the cartel. Imo Iraq is run by us leaners, the majority might be Iran leaners. I think Iran revenues are routed to us. The dead ayatollah will go there, Shia will be emotional. Dynamic situation.
Dynamic for sure. The USA is still hanging on to some purse strings in Iraq.
Looking at reality. Here in the Pacific Northwest, I look across the road and see winter grain crops starting to ripen. Here we had a late long, wet spring. Most farmer farmers (my self included) were around three plus weeks late on the first hay crop. I’m finishing mine. The spring crops planting was around three weeks late. It look like the grain harvest will start around three weeks or so depending on weather. This year it will be a bumper crop. The real question, will there be enough fuel to harvest it or ship? Most all of the grain is harvested and shipped out at the same time. Already the grain cars and showing up on the railroad sidings. Is there going to be fuel to ship it? There isn’t enough local storage to store most of the harvest. This doesn’t include the spring planted crops. So next week I’ll top off and my fuel storage tanks. Also, try and get all my materials stocked and everything I might need ordered. And, update and refresh my preparation stores.
Please do not go on about “reality” on a non-representative sample.
This is from the USDA, its June forecast:
https://www.ers.usda.gov/media/29224/whs-26f.pdf?v=97305
So your claim re a bumper harvest is close to a fabrication. Even if the Pacific Northwest (only 15-17% of total US wheat output) is doing as well as you say, it is more than offset by poor harvests elsewhere.
Farming the old fashion way.
https://plantgrowerworld.com/do-beans-add-nitrogen-to-soil/
Where I grew up the farmer near us used fava beans that grow during the winter and then plowed then under right when the flower died. The stocks were compost and the roots were food for his orchard.
“The Village Baker” by Joe Ortiz, Ten Speed Press, 1993, goes into detail about the role of fava bean flour in traditional French bread recipes.
i put beans next to every tomato plant.
once green beans are harvested, bean plant gets chopped up as green mulch right there.
in winter, its Vetch…heat generally kills it ere it goes to seed in mid spring.
thick, keeps the weeds down, and is also nitrogen fixing.(you need to continually add “inoculant”…which is microcritters that attach to the roots of the legume and help Fix the N.
its readily available at even my feedstore.
idk if said inoculant can get endemic, but i like to think it does,lol…and things like mesquites are legumes, too…so there may be a native kind.
when i pull up a dying bean plant, and look at the roots, the microcritters in question are lil whitish nodules on the main roots.
Sleepwalk
https://youtu.be/co0qrS8wUaQ?list=RDco0qrS8wUaQ Original Santo and Johnny
https://youtu.be/co0qrS8wUaQ?list=RDco0qrS8wUaQ Larry Carlton
https://youtu.be/5vyu7jAnwZs?list=RD5vyu7jAnwZs Jeff Beck
https://youtu.be/tHx_VC2wNkk?list=RDtHx_VC2wNkk Les Paul
https://youtu.be/WzsvN5HpYh8?list=RDWzsvN5HpYh8 Leo Kottke and Chet Atkins (P H C)
Sublime, and popular! Lets not all get caught Sleepwalking this summer into Fall!!
Great list. I’d add the Stray Cats version.
It’s getting harder to separate the different crisis; when they increasingly seem connected. I prefer to look at current events as a single force approaching a perfect storm of our own making.
A quick sample: It’s natural to focus on the global repercussions of both the Iran and Ukraine wars. Meanwhile, escalation best describes the future of both Ukraine and Iran, while levels of oil and oil derivatives like fertilizer are reaching the danger zone.
And while stocks keep going higher, a number of respected economists and financial types expect the AI bubble to collapse at any moment and take most of the stock market with it.
The Japanese Yen, a crucial element of the carry trade and third most traded currency in the world, has hit a 40 year low against the dollar, according to Business Insider. It also claimed a potential bank intervention by selling US Treasuries—Japan is the largest holder of UST—to support the Yen and possibly triggering a US bond market event. The Iran War and rising energy costs are part of the problem.
https://www.businessinsider.com/dollar-yen-usd-japan-why-jpy-so-weak-us-treasuries-2026-7
Moreover, a WSJ headline, “Trump Pledged No Forever Wars. Now He Risks Forever Talks With Iran” if so, there is just so much time available to fix things and “Forever Talks” can only guarantee an oil and oil derivatives disaster. And if you reach the precipice and Trump still refuses a negotiated end, what then? How far can you extend the war?
We are currently living in the age of cybercriminals engaged in phishing, hacking and ransomware; and it is increasing. It seems, as well, the day has arrived when certain forces working for the dark side, will soon figure out how to use AI to hack directly into everyone’s bank account and steel their money. Some say it’s already started. Phishing and Ransomware could soon become old fashion.
From the Atlantic, “Assume You Will Be Hacked” “AI is enabling a deluge of cyberattacks the likes of which we’ve never seen before.” https://www.theatlantic.com/technology/2026/06/ai-hacking-cybersecurity-banks/687562/
Something I have noticed about “Kicking the can down the road” is that the can gets weaker with every kick, until it breaks open and you find out what was inside.
Sometimes It’s rotting pork and sometimes it’s baby rattlesnakes.
From the sounds the market is making I suspect it is the latter.
I enjoyed listening to the interview with Philip Pilkington. The part about drawing down the Strategic Petroleum Reserve reminded me of the Professor’s speech about his straitened circumstances in _Uncle Vanya_ : “We might sell the woods, but that would be an expedient we could not resort to every year.” (This is the 1916 translation by Marian Fell.)
Ga at the station at the end of the road is $5.30/gal, and diesel is $6/gal. It’s a bit cheaper in town.
I suspect American elites do not get serious (at least as serious as they can get) about winding down the Iran war until reality hits.
re: – Pilkington unpacks the role of algorithmic trading: how they react to the obsessively cheery takes from the business and popular press (recall my regular criticism of Bloomberg in this regard), how the algos give weight to beginning-of-the-week positions, which enables traders to manipulate markets, and how the algos operate on momentum on top of that.
– The advantage of having fewer information entries is you can spend more time on the ones provided.
So, basically, this is the old google-washing or google-bombing ploy invented decades ago, now with new and “improved” algos. / ;)
per wiki:
https://en.wikipedia.org/wiki/Google_bombing
https://www.youtube.com/watch?v=io2UszGFSGA
hafta prolly re-watch this in the am with coffee.
Currie drops lots of grenades abt whats going on with China’s strategic positioning, re: commodities, in general.
https://www.youtube.com/watch?v=M8avg3pJOgY
and alistaire.
last 3 minutes or so reminded me hard why i am ashamed to be and american.
happy fourth, and all.
https://www.youtube.com/watch?v=4GPzVKN-tzY
i have no idea who either of these guys are, but the croatian guy seems rather solid in his analysis…ie: we’re already in a great power contest.
with ROW against a declining hegemon that cant accept the realty of its decline…so everybody is playing it safe, lest they piss off the declining empire, and get nuked…and simultaneously, watching while said empire undoes itself.
trump is the perfect executive for this,lol.
worth a watch. imo
i left it inspired.
I like listening to Alex Krainer in general as an outside-the-Western-media-bubble view but our host has some criticisms of him. So… I have to be wary of everything. I suspect a lot of these interviewees are having to try to run down a hill on topics in garbage news reports without falling down.
Pearl diving in a manure pit.
yep. infosphere is hopelessly marred.
and everybody has their bias-set and agendas…even if they dont recognise them, themselves.
like that Nance guy…black dude, foul mouth.
i know he’s full o shite,lol…but i still like him, and his technical and operational chops seem rather solid.
so one applies one’s filters.
Crooke remains my favorite, though.
ive been reading him for a coon’s age.
How much of what Pilkington talks about in algo trading/ info manipulation for oil is also taking place in A.I., data centers, etc.? The broader stock market?
It took me a bit to figure out what Pilkington meant. An AI type response helped (below).
“To find the implied cost of crude oil, consider the prices of gasoline and diesel. If the average price of gasoline is $3.00 per gallon and diesel is $3.50 per gallon, the calculation would be:
* Gasoline Revenue: 2 barrels = 2 × 42 gallons × $3.00 = $252
* Diesel Revenue: 1 barrel = 1 × 42 gallons × $3.50 = $147
* Total Revenue: $252 + $147 = $399
* Implied Cost of Crude: Total Revenue – Crack Spread = $399 – $59 = $340
* Cost per Barrel of Crude: $340 / 3 barrels = $113.33
Thus, the effective cost of a barrel of crude oil would be approximately $113.33”
In a nutshell, this implies that the futures market is fishy. Whatever is going on, the Trump Administration of USRAELI is somewhat hamstrung. If it is back to ‘bombing to win’, then, if the ‘effective cost of a bbl of oil goes up due to outflow constriction in the Straits of Hormuz, i.e. less supply; will those holding future contracts at $70 demand ‘real oil’, will they actually get it or as Pilkington suggests the 3D printer won’t work at supplying it. Hmm.