AR.Edwards

Talking to some big oil traders lately and they are not optimistic in any sense. Oil shortfalls of 600 million bbls or more in the next 60 days. I think it’s high probability we see a meaningful decline in gdp which will allow for enough demand destruction to look past the ugly inflation impact on the horizon. That impact will also be levered in conjunction with a feed through to anything related to oil related supply chains from fertilizer to PVC on top of pass through costs from diesel fuel. Farmers are going to have a very tough time. That sets up potential for a repricing of the curve front running lower yields and future cuts to offset a potential recession It’s becoming more likely this war is far harder to resolve in a short amount of time and the damage is already done it just hasn’t fed through the pipeline yet. I’t is possible the lower band of the next collar will have a 5k handle. How this impacts employment over the next three number will be very important. The chicago fed already upped the unemployment forecast this week I think there is potential for a 40-75 bp upside move in sofr here relatively quickly Yes I’m taking my book but that’s why I’m positioned this way.

Looks like we've hit an inflection point where higher oil prices no longer push Fed policy expectations higher. Lower equity prices is moderating inflation fears by highlighting recession fears.

Mark Zuckerberg texts Elon Musk February 3, 2025