Joe Biden was the most-bullish President for oil in historical past

Four years ago I wrote about: Why Joe Biden could be the most-bullish US President for oil in history.

He was.

Between his election and today, the price of crude nearly doubled. Shares of the XLE oil company ETF more than tripled.

Of course, my case wasn’t really about Biden, it was more about the pandemic demand rebound. Despite what the average American thinks, the President has little control over global oil prices; he did add some tougher regulations but US oil production is also at records, which is stronger than I thought it would be at the depths of the pandemic.

In contrast, oil companies struggled in Trump’s first term, falling dramatically. Of course that’s also the pandemic effect but even before covid, the XLE was down 20% from Trump’s election until the first people got sick in China, and that’s despite flat oil prices.

The lesson, I believe, is that oil companies can’t stop themselves from drilling. If Biden happened to slow the industry down then the incremental decline in supply only helped them, at least collectively.

Looking ahead, within the oil investing community, no one believes that ‘drill baby, drill’ is coming but I wouldn’t be so sure. Shale drillers can’t seem to stop themselves from chasing the incremental barrel.

What’s next?

First of all, I don’t like the look of the oil chart. This looks like a head-and-shoulders with a target of $54.

Now, for me to envision a decline that deep, it would take some real trouble at OPEC. That’s not out of the question as the latest move only curbed planned OPEC production increases through December.

Is there something in the political mix that would encourage them to break ranks now? It’s not clear to me that there is but there so many political cross-currents at work here that there could be something explosive in the mix.

China’s stimulus package announced today also looks like a dud. The finance minister said more is coming but even with that promise, crude prices fell $2 on Friday and are down $2.21 to $68.16 today.