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’Dubai is worth more than you think
That is, Dubai EFS crude — rather than the emirate itself — is worth more than you think.
As Morgan Stanley highlighted in its commodity outlook for 2010, Dubai crude, which historically traded at a discount to Brent crude due to its heavier and sour quality,
Oil breaks
WTI crude was trading sub $70 per barrel on Monday, a move which solidifies its breakout from a recent $70-80 trading range.
The big question facing the market now is whether prices will continue to trend lower ahead of the holidays,
BNP Paribas: Oil is an inflated asset
BNP Paribas’ Harry Tchilinguirian puts forward the idea (once again) that oil prices have disconnected from physical reality, adding that until unconventional monetary policy is removed from the table the market can expect crude futures to trade as an investment class rather than a consumption asset.
Gasoline cracks are strengthening
Take out some refinery production in the US amidst weak global demand for distillates, and what happens? The RBOB gasoline crack — the US benchmark measure of the difference between the price of crude and that of gasoline — strengthens to the point it’s trading at par with heating oil.
The Daily Mail discovers contango
We love talking about contango on FT Alphaville.
But no one, it turns out, can turn a nerdy market-structure story about the shape of the futures curve into an alarmist `evil speculator’ rant extraordinaire quite like the Daily Mail.
The CME’s sour
Just two days after Saudi Aramco decided to change the way it prices its oil – by abandoning the Platts WTI benchmark in favour of Argus Petroleum’s Sour Crude Index – the CME, owner of the Nymex exchange,
Discorrelation alert
We’ve noted before that correlations between asset classes are increasing. We’ve also remarked upon the increased tendency for crude and equities to correlate, specifically.
On account of that, the following chart from Ashraf Laidi,
Banks’ flashy commodity positions
Ah, those mysterious ‘fixed income, currency and commodities’ divisions at banks like Goldman Sachs. They do so well, yet we never know exactly how much which bit is making or how.
Well, we’re pleased to report a little more light can be shed on these matters now.
The not-so-bullish case for energy prices
The bullish case for oil has been fairly well established by the likes of Goldman Sachs, Barclays, Merrill Lynch at al.
But, as it turns out, there’s a convincing bearish case to be made too — and the man putting it forward most recently is Edward Morse,
Betting on Brent
The contango is widening, floating storage is on the increase, and Brent’s premium to WTI is intensifying by the day (note chart below) — which means only one thing: stocks at Cushing, the physical delivery point for the WTI Nymex contract,
A forward curve proposition
Commodity curves used to be relatively dependable. Gold, for instance, was pretty much always in a state of perfect contango irrespective of price due its money-like status. This currency-esque characteristic therefore made its curve a reflection of the time value of money.
What’s really moving the energy markets
Supply? Bleh.
Demand? Bleh.
Geopolitical risk? Bleh.
Speculators? Sort of.
Fear of over-regulation? Yup!
That, at least, is the observation of Jeff Korzenik at (in)efficient frontiers this week,
The Eurobob effect
Here’s a funny one, just when crude fundamentals actually turn somewhat bullish, what does the price of crude do on Monday? It falls.
So what is going on? A lot of it probably lies in the realms of the gasoline market.
The problem with commodity ETFs
The day ahead of the United States Natural Gas (UNG) ETF’s futures roll from the July to August contract, Olivier Jakob of Petromatrix — who has inadvertently become a bit of a lone crusader in the mission to expose the influence of exchange traded funds on commodity markets — presents an impressive summary of the story so far.
Oil bulls
Crude continued its ascent overnight: US light crude prices (July delivery) rose around 80 cents to just over $72 a barrel.
…the current rally in oil is nearly twice the average bull market gain in nearly half of the average duration.From Bespoke Investment.
Crude over $71, or 20 Big Macs
Crude futures are racing higher on Wednesday. The ascent has much to do with a continuing slide in the dollar, unexpectedly large crude draws in the last week according to figures from the American Petroleum Institute on Tuesday night,
Quote du jour, Iraq on floating inventories edition
Via Bloomberg:
“We don’t think it’s a wise economic decision” to produce oil from secure underground fields then pay to store it in floating tankers, Iraqi Oil Minister Hussain al-Shahristani said yesterday in an interview at the Dead Sea in Jordan at the World Economic Forum.
Platts versus the rest of the energy trading world
Platts, a key assessor of physical energy prices, appears to be treading on some thin industry ice.
Energy traders are reportedly up in arms over the group’s planned changes to its pricing methodology which would see it move the timing of some of its US over-the-counter assessments to 3.15 pm from 2.30pm US central time. Platts’ reasoning for the move is as follows:
Non-Opec decline: the means towards a renewed bull market
As the FT reported earlier this week, North Sea production is being hit critically by the economic crisis. The story quotes findings from a Deloitte report which says the number of exploration wells being drilled in the North Sea has collapsed by 78 per cent in the first quarter of 2009 versus the same period last year.
Beware, commodity index rebalancing ahead
The major commodity indices rebalance their respective asset weightings once a year (or occasionally more) — and with that comes a mass dose of buying and selling. The 2009 rebalancing is expected to start sometime this week.
Goldman Sachs ‘surge theorist’ says $200 oil in sight
Think $122 a barrel is high? Think again.
Goldman Sachs’ Arjun Murti believes oil prices of $150 to $200 a barrel within the next six to 24 months are “increasingly likely”. Mr Murti is the analyst who three years ago correctly predicted a price “super-spike”