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“It’s equal can not be seen on this earth.” – Anthony Lucas

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These words describe the image of oil soaring into the sky from beneath the clay Texas surface at the first major oil discovery in US history. It occurred 124 years ago today when Anthony Lucas and his partners struck black gold, starting the US oil industry. Lucas and company tried and failed for years to find oil underneath the Texas, but January 10^th, 1901, was the day their dreams were finally realized.

Like the dog that catches the car, right after finally finding success, the question quickly became “Now what?”  Once oil started flowing and launched the pipe they were drilling with 100s of feet in the air, they realized they had nowhere to put it or no way to stop it from flowing. First, they tried a 2.5-foot-high wall around the perimeter of the well, but it overflowed within 24 hours. They built a second wall at a wider circumference, but that quickly became overwhelmed too. A third wall covered 50 acres, but it wasn’t long before that was overflowing too. Talk about a good problem to have! Eventually, they got things under control and so began the modern-day US oil industry.

The chart below shows how US crude oil production started to take off after 1901. According to the Department of Energy, in 1900, the US produced 63 million barrels of crude oil annually. Within 10 years, production tripled. Another 10 years later, it more than doubled again and kept rising from there until peaking in 1970.  Production was nearly cut in half from 1970 through 2008 as analysts started to fear the world was running out of oil and prices shot well into the triple-digits. Then, proving the adage, that the cure for higher prices is higher prices, the shale boom arrived, and production since then has rebounded to a historic degree. So much for running out of oil.

Even as the US oil industry exploded in the early 1900s, exports were practically non-existent until more than 100 years after Lucas’ first discovery.  Beginning in the 2010s, though, exports surged like nothing ever seen before and now total a record 4+ million barrels per day.

When it comes to recent crude oil performance, prices were weak for most of the second half of 2024 after prices peaked in the high 80s during the spring. Over the next six months, WTI sank into the mid-60s where it started to stabilize. Since early December, though, prices have started to rebound with a rally this morning taking it above $75 per barrel and back above its 50-day moving average for the first time since October. While one level of resistance has been cleared, another remains at the downtrend line in the high $70s. If those levels get taken out, markets will find it increasingly difficult to prevent concerns over inflation from getting louder.

For the next couple of hours, though, December’s non-farm payrolls will be the market’s main area of focus, and the much higher-than-headline forecast has yields surging and equity futures plunging. At 4.78%, the 10-year yield is now at its highest level since November 2023.