In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium, Lou Whiteman, and Tyler Crowe discuss:
- Why oil prices are dropping.
- Did China prevent an energy crisis?
- The new OpenUSD stablecoin.
- Are stablecoins disruptive?
- Nike’s earnings.
- Can Nike make a comeback?
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Travis Hoium: Is Nike coming back into fashion? Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I’m Travis Hoium, and I’m joined today by Lou Whiteman and our special guest, Tyler Crowe. Guys, we’re going to get to Nike. Nike stock was down pretty big after the market closed yesterday after they reported earnings, and now it’s shockingly up today. We’ll get to that a little bit later.
But I wanted to start with an area of the market that we don’t talk about all that much, but it’s actually a huge deal for consumers, for the economy overall, and that’s oil. Tyler, this is a commodity that we thought was going to be a huge problem for the economy by this time in 2026, when the Strait of Hormuz closed, we were supposed to have $200 barrels of oil. Oil is still up about 20% for the year, but went down to about $70 a barrel for West Texas Intermediate. What is going on with the oil market? Did that just never materialize into the economic concerns that we thought they were going to, and is this whole thing over?
Tyler Crowe: Well, talk about a loaded question here. I think one of the things with the initial fears, so much of this was basically this, for a lot of commodity traders, this was considered the doomsday scenario, but some of the things that ended up happening were with a lot of investing decisions and major global geopolitical reactions, there was a lot of second or third order a knock on effects that affected this in some ways. For one, we started this war or conflict, however you want to label it, with the closure of the Strait of Hormuz, where not too long after, it was like, we’re going to open it back up. Either we’re going to open it up by force, or we’re going to start negotiating. Then there’s just been this tit or tat. It seems like for two or three months now of negotiations started we’re going to open it. There’s been a lot of this is temporary, we can get through this. As we came into the crisis, there was actually quite a bit of surplus oil on the market. We were actually oversupplied relative to demand in the market. We were in a position of strength on the market, and at the same time there was a lot of unprecedented changes that we saw. Over this period, so far, about 1.3 billion barrels have been drawn down from strategic petroleum reserves around the world, whether in the U.S., in Europe, Japan, and that’s been a major buffer for this, and not to mention what China has done as well, because demand imports from there have also fallen off a cliff.
Travis Hoium: But isn’t that like a band aid for the market?
Tyler Crowe: Maybe. This is the really hard thing to say, because one of the things that is not necessarily known is how much oil in storage or how much does China have? There are some what they call floating tank storages that you can actually monitor, and that’s been like using satellite imagery data. People have been able to do this because obviously China does not publish their strategic petroleum reserves but they also have these massive underground caverns that nobody really knows how much is in there at any given moment. It’s been using those as a massive drawdown, and they were reducing their total amount of imports at the time at about five million barrels per day. When you started thinking about a 13 million barrel per day gap that was leaving the Strait of Hormuz, taking five out was a huge chunk, and you start adding in SPR releases. You saw demands of destruction in other parts of the world, it has somewhat deflected the blow that I think a lot of people had seen so far.
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