borrowed time
on energy markets, the stories we trade, and the difference between noise and signal
04-Oct-25
There is a particular kind of dread that comes with the weekly report.
Not the dread of having nothing to say. The other one. The sense that too much happened, that somewhere in the noise there is real signal, and that the hard part is the extraction.
I write about energy markets: oil, natural gas, Canadian pipelines. Every week, the same themes return like seasons. OPEC is meeting. A war is threatening supply. A pipeline is delayed. Demand from China is shifting.
The facts change. The themes persist.
You can grind through that for a while. Show up Monday, read the headlines, look at the charts, write something that sounds informed. At some point a different question appears:
What if most of what moves markets is not real?
What if the stories we tell about prices are running ahead of the facts?
That question changed how I think about energy. And eventually, how I think about thinking itself.
The false simplicity of markets
The hardest thing about energy markets is not complexity. It is false simplicity.
Every week brings headlines that claim to explain everything. Peace talks in Ukraine, oil drops four dollars. OPEC announces cuts, oil rises. A new pipeline opens, prices adjust.
Each event looks decisive. The financial press draws a straight line from cause to effect, as if the market were a machine with clear inputs and outputs.
It is not.
Here is what I have learned after years of watching. Markets trade stories before they trade facts. The price you see today often reflects a narrative that reality has not yet confirmed, and may never confirm.
I call this borrowed time.
Regimes matter more than prices
The question that matters most in energy is not “what is the price”. It is “what kind of market are we in”.
I think of this as the regime.
A regime is a set of structural conditions that define how prices behave:
- In a supply constrained regime, prices rise until buyers give up. Demand destruction.
- In a demand constrained regime, prices fall until producers give up. Supply shuts in.
- In a balanced regime, prices wobble around the cost of producing the next barrel.
Each regime rewards different behavior. A strategy that protects you in one regime will hurt you in another. The producer who locks in prices during a supply crunch captures value. The same producer doing the same thing during a demand collapse locks in losses.
The danger is not picking the wrong price. It is sitting in the wrong regime and failing to notice.
I track this with a handful of signals: inventory levels, spare capacity, investment trends, demand growth. When enough of them flip, I know the regime is shifting, even if the headlines have not caught up.
Two signals flipping means transition. Three or four means a new regime is taking hold.
The specific signals matter less than the discipline of watching them. The point is to make it harder to ignore evidence that your view of the world has expired.
The cartel’s real story
No framework for energy works without a view on OPEC. Most views on OPEC are wrong.
The popular story treats the cartel as a single actor with a single will. Saudi Arabia decides. Prices follow. It is a clean narrative with a clear protagonist.
The reality is messier.
OPEC is a collection of countries with different needs, different politics, and different levels of control over their own production. They announce quotas. Whether they follow them is another matter.
The gap between what OPEC says and what OPEC does is where the real story lives.
I watch compliance rates obsessively. Not because they predict prices directly. Because they reveal something deeper: whether the cartel can actually manage supply.
When compliance is high, say 85% or better, OPEC works roughly as advertised. Announced cuts translate to real barrels off the market. The floor under prices is solid.
When compliance slips, 78%, 75%, or lower, something else is happening. Members are cheating on their quotas. Discipline is breaking down. The floor is becoming a story rather than a fact.
In that zone, the cartel faces a brutal choice:
- Keep cutting and lose market share to competitors who face no such limits.
- Increase volume, crash prices, and try to discipline everyone through pain.
Neither option is good. The choice defines what comes next.
When you hear about an OPEC meeting, do not ask only what they announced. Ask what compliance has actually been. That tells you whether the floor is real.
The myth of underinvestment
There is a story that circulates constantly in energy. The world has underinvested in oil production, and a painful price spike is coming.
Like many compelling stories, it mixes truth with illusion.
Investment in some kinds of supply has dropped. High cost, high risk projects such as Arctic drilling, ultra deepwater, and unstable regions have seen capital flee. This is real.
Now look at where money is actually going.
National oil companies are spending billions on new capacity. Saudi Arabia is building toward 12 million barrels per day. The UAE is pouring money into expansion. Guyana went from producing nothing to large export volumes in just a few years. The Permian Basin in Texas keeps adding rigs.
The system as a whole is not short of oil. Something subtler is happening. A reshuffling of who produces it. Low cost barrels are gaining share. High cost barrels are being stranded.
This is a market share story, not a simple shortage story.
When someone tells you that underinvestment guarantees a spike, ask them where, exactly. Which basins. Which companies. If the answer stays vague, the story may be running on borrowed time as well.
The Canada puzzle
If you want to see structural mispricing in action, look at Canadian energy.
For fifteen years, Western Canadian oil traded at a steep discount to world prices. Not because the oil was bad. Because the pipes were full. Landlocked production, no access to the ocean, dependence on routes through the American Midwest.
When production grew faster than pipeline capacity, the discount exploded. At times, Canadian oil sold for forty dollars less than the global benchmark.
Markets treated this as permanent. Canada was trapped. The discount was destiny.
Then a pipeline called TMX came online.
Five hundred ninety thousand barrels per day of new capacity. The first route to the Pacific coast in a generation. Canadian oil could now reach Asia. The discount that sat at twenty dollars began narrowing toward ten.
The barrels had not changed. The constraint had.
I think of Canada as an option on infrastructure. The pessimism is priced in. Everyone knows regulatory approval is hard, projects face delays, politics are difficult. What is underpriced is the chance that projects actually get built despite all of that.
Each time steel goes in the ground, something “impossible” becomes real, and prices adjust.
China, the variable that decides everything
If I could know one thing about the next year in energy, I would ask about Chinese demand.
Not because China is the biggest consumer in absolute terms. Because China is the biggest consumer at the margin. The change in Chinese demand is larger than the entire consumption of many countries.
When China accelerates, global markets tighten. When China slows, spare capacity appears everywhere.
Recent signals have been concerning. Natural gas imports have fallen for more than a year. Domestic production is rising. Beijing is deliberately reducing dependence on foreign energy, not for environmental reasons, but for strategic ones.
If this continues, the bullish case for many energy investments weakens. A lot of liquefied natural gas projects under construction assume Asia will eagerly buy the supply. If Asia does not want it, the economics change.
I do not pretend to know what China will do. I doubt anyone does, including the Chinese government. What I do know is that anyone with a very confident view on Chinese demand is probably overconfident.
The right posture is humility plus attention. Watch the data. Update your view. Resist the temptation to draw straight lines from the recent past into the future.
The discipline of uncertainty
The framework I have described will not tell you where oil prices will be in December. It will not tell you whether natural gas rallies this winter.
It does something different.
It helps you see which stories are load bearing and which are decoration. It helps you notice when the market is trading fear instead of fundamentals. It flags regime shifts before the consensus catches up.
In practice, it comes down to a few principles:
- Most geopolitical premiums are borrowed time until real barrels disappear.
- Regimes matter more than spot prices. Know which one you are in.
- OPEC’s power lives in compliance, not in press releases.
- Underinvestment stories often hide market share shifts.
- Infrastructure constraints feel permanent until one project proves they are not.
- The path of Chinese demand matters more than most people admit.
None of this is a crystal ball. Markets will still surprise you.
The difference is this. You are less likely to be surprised by things you could have seen if you had watched the right signals.
The goal is not prediction. The goal is preparation. Know what kind of market you are in. Know what the borrowed time looks like. Know when you will update your view.
The work that remains
After all of this, the weekly report still needs to be written.
The prices still need checking. The regime still needs assessing. The stories still need separating from the facts.
The work feels different now.
Instead of drowning in noise, I have a small set of questions that filter most of it out:
- Is there actual supply missing, or just fear of supply missing?
- How many of my regime signals have flipped?
- What is OPEC compliance doing in practice?
- Has any infrastructure crossed from impossible to real?
- What is the latest read on Chinese demand?
Most weeks, the answers are quiet. Nothing has changed. The borrowed time continues.
Some weeks, something shifts. A signal flips. A pipeline opens. Compliance data surprises. Those are the weeks that matter.
The rest is just weather.
The markets will keep running on stories. Premiums will appear and vanish. Regimes will shift. Pipelines will stall, then surprise. Demand will bend in places no one expected.
The weekly report will not make that easier. What it offers is a place to stand while you watch, a set of questions that helps you see the difference between what is real and what is running on borrowed time.
Ask those questions often enough, and something happens.
The noise fades. The signal sharpens. The dread lifts.
What remains feels almost like pleasure.