Yo, Pit Crazies,

Say what you want about the current global capitalist system, but there’s nothing like a big price hike to get supply to catch up.

Europe was just about out of petrol and natural gas … but somehow managed to find both, driving the pair of key commodities down to recent lows.

That Russian/Ukraine war, sadly, is still raging. My guess is the Russians are not leaving since the territory they seized has nearly unlimited natural resources.

Ukraine wants those back … as do other countries. I even read Iran is supplying the Russians with drones.  Iran!?  This is setting up to be a long, drawn-out mess.

USO two-year chart with long- and short-term IVs on the bottom.

The only thing this episode cements into the West’s psyche is industrial countries need energy and the current green solution is at least a decade away. More like 20 years, in my view … unless we start building nuclear reactors.

These are all topics Frank Gregory has pushed in his Capitol Gains, and our oil trades have paid nicely, including a recent 89% in Petrobas (Ticker: PBR).

Now it’s to think longer-term.

IV Is Dripping

We are now running up against a two-year low in implied vol in the major oil companies.  The latest FOMO craze has been to dump oil and related industries and get back into shiny new Tech. That’s evidenced by the Invesco QQQ Trust (Ticker: QQQ) 15% rally this year.

Occidental Petroleum Corp (Ticker: OXY) is trading near the lows for 2022 and IV lows not seen for two years …

OXY two-year IV chart

I like the longer duration calls in here. The idea is, buy commodities when they are cheap … and buy commodity volatility at two-year lows with a resource war raging in Europe.

To Your Trading Success,

AG