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’This crude old eurozone crisis
Bank of America Merrill Lynch’s commodities analysts have picked up that Brent crude — when priced in euros — is uncomfortably close to its July 2008 peak.
And they’ve added some interesting points:
Euro crisis, Brent oil edition
Courtesy of Olivier Jakob at Petromatrix, FT Alphaville presents the price of front-month Brent oil futures expressed in euro terms:
That would be echoes of the 2008 record oil price. This time,
The curious case of ‘abnormal’ backwardation
John Kemp at Thomson Reuters is a big fan of commodity curves — backwardation, contango and all the principles that come with it.
As he often notes, one of the key theories affecting the area is the idea of a convenience yield,
Bye, bye WTI-Brent spread disconnect…
Whoa…. look at that move in the WTI-Brent spread. That’s at least $4 worth of tightening in less than 10 minutes:
And what has caused this dramatic turn of events?
No less than this surprise statement from pipeline operator Enbridge declaring a reversal of the all important Seaway pipeline,
Fundamentally speaking…
From Olivier Jakob at Petromatrix on Wednesday:
While crude oil futures continue to be supported by the Iranium premium, the products are not following and the light-end cracks are suffering further. The Naphtha and RBOB cracks to Brent are going as we expected deeper into negative territory and the pressure is now also coming to the European Distillates physical premiums.
I thought I saw a backwardation
It’s only been four days, yet the backwardation in WTI — which caught everyone by surprise on Monday — has already started to ease.
Of course, if it turns out to be this short-lived, the theory that the flip may have been caused by a short squeeze rather than fundamental tightness,
WTI is no longer a burden to passive investors
It was quite a day on Monday for the WTI US oil benchmark. The structure of the futures curve finally flipped into a subtle backwardation, seeing the contract join Brent in a formation which sees front month futures trade more expensive to those further out.
[Explaining backwardation] The WTI-Brent anomaly
… continued.
How do you actually profit from a contango trade?
To understand the WTI-Brent deviations of the last year, understanding the formation of the industry’s contango trades is essential.
Goldman on who’s really wagging the oil market
If you’re wondering what Goldman Sach’s view on crude is — it can be summed up in one neat sentence from their latest research note:
The world crude oil market remains exceptionally tight.
The reasoning is pretty straightforward.
The Fed’s convenient WTI ‘Cushing’ factor
Since the Treasury yield curve is becoming less responsive to Fed intervention, we’ve outlined the case for why it might make sense for the Fed to start targeting the energy curve instead.
Obviously the Fed mandate remains an issue.
What happens when you lose a global oil benchmark…
Another one, somewhere in the world, flourishes…
From the Dubai Mercantile Exchange — the keeper of the world’s only possible alternative to the ailing WTI and Brent crude contracts (for now) — on Monday:
Goldman says ‘it’s got riskier’ (but we still ♥ commodities)
For anyone wondering how commodities will do out of the USA(A+) downgrade, Goldman Sachs takes a stab at predicting the course of events in its Monday commodities research note.
In a nutshell, it’s going to get riskier out there,
The SPQR
Introducing the SPQR: the Special Petroleum Quantitative Reserve.
Some 36 years in the making, specifically designed to provide the US (and via that global markets) with vital oil supplies if and when an emergency strikes,
WGO – What’s going on in Brent-WTI? [updated]
First there was Cushing syndrome. Then there were Brent market antics. Now, nobody knows what’s going on in the Brent-WTI spread.
The difference between the two contracts has (once again) reached record levels.
There’s no change for the US driver…
… because the gasoline crack (the difference between the price of crude and the price of gasoline — a key metric in determining whether there’s enough incentive for a refinery to process crude) is roofing.
There’s always a silver lining…(even in a commodity rout)
And on Thursday that lining was apparent in the gasoline market.
As Stephen Schork of the Schork Report noted on Friday:
You know it has been a bad day when a 6.84 per cent drop can be described as the best performance of the complex,
Rout
A bloody day across the commodities complex.
Bye, bye Cushing syndrome (possibly)
By now, anyone following oil markets will be familiar with Cushing syndrome. The one-way flow problem which affects the Cushing delivery point for Nymex WTI futures in Oklahoma preventing oil that’s gathered there to travel to alternative domestic or sea-borne markets where demand is higher.
Goldman reiterates bearish call on commods (again)
Yikes.
This is the third bearish commodity note from Goldman Sachs in one week.
They must really be keen on the view, eh?
And, dare we say it, the latest note sounds rather panicky — entitled as it is “Growing conviction in NT downside,
A little less Brent…
Ever wondered how much Brent there actually is in a barrel of Brent oil?
Answer: Not very much, and increasingly less.
The following chart from JBC Energy on Monday might be of interest to anyone who has recently repositioned from the WTI market and into the Brent contract instead:
Not just a no-fly zone [updated]
Update (1245 UK time): Hold the prospect of any military action for a while, it looks like — flashes via Reuters:
RTRS-LIBYA DECIDES TO HALT ALL MILITARY ACTION-LIBYAN FOREIGN MINISTER
RTRS-LIBYA ACCEPTS THE UN RESOLUTION FOR AN IMMEDIATE CEASEFIRE – LIBYAN FOREIGN MINISTER
RTRS-LIBYA ENCOURAGES OPENING OF ALL DIALOGUE WITH ALL SIDES
No word yet from Gaddafi himself,
The Saudi capacity puzzle
Could Saudi Arabia be telling porkies when it comes to its spare capacity capabilities?
It’s something Goldman Sachs analysts are wondering on Tuesday.
For example, they’ve deduced — from reverse-engineering the kingdom’s production levels — that Saudi may have raised output before the crisis in Libya ever broke out.
‘Peace’ breaks out in Brent crude
Noted by the FT’s Jamie Chisholm early on Thursday — a $3 sell-off in Brent, on reports of a survival plan for Gaddafi ‘peace plan’ for Libya:
A very odd peace plan, and a grimly amusing oil price reaction.
The Libya effect on crude differentials, charted
We’ve highlighted the Libyan crude substitution problem on FT Alphaville here and here already.
But, as ever, we like charts. And here’s a nice one from JBC Energy reflecting the Libyan substitution effect across the light sweet crude complex as of last week:
Gaddafi’s market
Related link:
Desperate Gaddafi clings to power – FT
Your chance to quiz CME Group
If you’re keen to find out more about the causes of this…
You might be interested in this.
FT Energy Source is asking for your questions to Terry Duffy and Craig Donohue, the chairman and chief executive of CME Group,
Oil spikes, shocks and stocks
With oil on the rise, what next for equity markets?
That’s the question KBW try to answer in a note out on Monday. The analysts look for correlations over the last 50 years between big (ten and 20 per cent quarter on quarter) WTI rises and changes in the S&P500 and the Keefe Bank Index.
WTI arbitrage is a PADD II windfall
There’s been some interesting commentary on Friday regarding the ongoing problem of the widening WTI- Brent spread, which struck a record wide in like-for-like basis terms on Thursday.
First this from John Kemp at Reuters,
A record WTI-Brent spread, a new paradigm
Here it is, the all time record spread between CME WTI front-month future crude and ICE Brent front-month future crude:
According to our assessment that’s a record on a like-for-like basis on both Bloomberg and Reuters terms (Reuters data quoting a slightly higher historical record from January 2009).