Cheap Oil Is the Market’s Biggest Lie

History has a perverse way of teaching us the same lesson twice. 

In 1914, Europe’s ruling class toasted to peace in lavish drawing rooms, only for the Archduke’s blood to spatter Sarajevo’s cobblestones and ignite the First World War. 

While those diplomats clinked glasses, cannons started rolling into position. Throughout history, peace has always been a fragile thing that more often than not arrives already splintered. 

We’re seeing that this week as Putin delivered his olive branch tipped with warheads. It’s an all-too familiar script as peace deals were touted in headlines over the last week, driven by President Trump’s renewed vigor to end the Ukraine-Russian war. 

And amid the talk of peace corridors, deal-making, and ending the bloodletting with a handshake, the air smelled faintly of armistice. 

Unfortunately, Putin’s answer to the potential peace deal thundered overhead — 598 drones and 31 missiles tearing through Kyiv, killing nearly twenty civilians in one of the war’s most brutal nights.

The timing wasn’t coincidental, it was his signature on any potential treaty: Mockery delivered via missile.

Just as the bodies were being pulled from the rubble, Ukraine has been mounting a different kind of counter-punch. 

Their actions weren’t  symbolic, nor were they diplomatic in any way. 

In August alone, Ukrainian forces struck ten Russian oil refineries, knocking out an estimated 17% of Moscow’s refining capacity — roughly 1.1 million barrels per day. 

That’s not some blip in the market ticker, dear reader, it's the equivalent of draining the lifeblood out of Russia’s economic veins.

The Druzhba pipeline — ironically named “Friendship” — hasn’t been flowing with much camaraderie lately. Attacks on the pipeline have left Moscow facing fuel shortages and rationing. 

What followed were export bans as Russians found themselves waiting in lines, reminiscent of the 1970s American gas station choke points. But this isn’t just a supply issue; it’s humiliation dressed up in oil-stained overalls, and Putin needed to prove his strength. 

What Ukraine did was expose Russia’s dependence on an increasingly fragile energy infrastructure.

Of course, peace is now further away than ever before. 

Each time you hear some pundit on TV dangle the idea of diplomacy, someone in Kyiv ends up digging through ash. The “talks” are the illusion; the missiles and refinery fires are the reality. 

And anyone betting on lower oil prices because of peace rumors is playing Russian roulette with six bullets in the chamber. 

But this is just part of the story…

Across the Atlantic, demand in the U.S. is still going strong as we head into the final weekend of the summer driving season. The latest EIA data showed that U.S. crude inventories dropped by 2.4 million barrels in a single week, outpacing expectations. Gasoline and distillate stocks slid a bit too, yet WTI prices still languished in the low-$60/bbl range. 

At these prices, the market is screaming “oversold,” not “glut.” 

Demand hasn’t cooled, it’s running hot into late summer, and that fact alone may put a floor under the market, no matter how much rhetoric you’re hearing these days that $50 oil is on its way. 

While Ukraine and Russia are swapping blows over pipelines and refineries, Trump is tightening the vice on global buyers of Russian crude. The 50% tariff on most Indian imports was as subtle as a sledgehammer against Russia’s largest oil customer. 

The White House is making it clear: Buy Russian barrels and you’ll pay the toll in Washington. Before you start cheering at the thought of India shifting that oil hunger over to U.S. barrels, keep in mind that Russian crude will forever flow into India and China if it’s being sold at a discount.

That’s the problem with tariffs as a weapon. They bite, but they don’t always break the skin. India knows Russian crude is cheap, and cheap oil wins every day of the week. So for Delhi, that math beats any U.S. tariff threat, and for Moscow, it’s a lifeline. 

And for the market? Well, it’s one more kink in an already tangled supply chain.

Let’s pause here, because the disconnect is astonishing…

You’ve got a global war grinding on, refineries burning, pipelines sabotaged, sanctions flying, tariffs piling up, inventories falling, and demand rising — and still, oil prices hover in the low-$60/bbl range. 

If you’re scratching your head, you’re not alone. This is what happens when the narrative is dictated by wishful thinking rather than supply and demand.

Just take a closer look under the hood and you’ll see the structural cracks in the U.S. oil industry. 

The rig count is down, frac spreads are shrinking, and drilled-but-uncompleted wells (DUCs) are getting drained like a checking account at the end of the month. 

As if that weren’t enough, we know that the “easy” barrels have already been pulled out of the ground, evidenced by the disappearing Tier-1 acreage. What’s left is harder, deeper, and more expensive to produce. And yet, investment in new drilling remains anemic, and our E&P field is wary of spending in a market where investors punish capital expenditures like they’re sins.

It’s those drillers that can survive today’s lean days that’ll be the same ones delivering monster gains when prices inevitably rebound.

And they WILL rebound. 

There’s simply no scenario where a war-crippled Russia, a hungry India, a defiant China, and an ever-growing U.S. consumer can all coexist peacefully in an oil market priced at $64 per barrel. 

Reality always wins, and reality says barrels are scarcer than Wall Street realizes. Meanwhile, our thesis hasn’t changed — oil is undervalued, and the market is blind. 

The real opportunity isn’t in trying to guess the next peace headline or tariff threat. It’s in owning the drillers positioned to endure the turbulence. Specifically, our gaze is focused on what is arguably the best oil region in the world today, the Permian Basin. 

It’s the crown jewel of American oil output right now, and the companies operating there know how to squeeze value out of lean times. They’ve been there before nearly a decade ago when prices collapsed. To survive, these drillers cut costs, improved efficiency, and learned to survive in hostile price environments. 

And when the rebound hits, they’ll be the ones reaping the windfall.

Look, the war between Russia and Ukraine has no certain timetable (Putin proved that this week), and Trump’s sanctions have no ceiling. Demand seemingly has no brakes, and oil refuses to stay in the ground.

Right now, oil is screaming its opportunity through the black smoke billowing over Russian refineries and the rubble of Kyiv. 

The only question is whether you’ll be smart enough to listen.

This is where your search begins.