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’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.
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:
BarCap on oil-fuelled global inflation
There were several points of interest (defined as “stuff we did not know”) in a new BarCap note about the potential effects on global inflation if oil prices keep rising.
After the week of oil prices we’ve had,
IMF wakes up to oil price rises…
… and not a moment too soon.
It’s been quite a couple of days for oil prices, with front month WTI crude hitting $110 on Thursday for the first time in more than two years:
Why? Take your pick:
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.
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).
WTI’s upcoming ‘Keystone’ problem
If you thought the distortions in the WTI-Brent spread couldn’t keep going for much longer, you may be interested in the following.
TransCanada’s extension of its Keystone pipeline could see it pumping as much as an additional 156,000 barrels per day into Cushing,
Correlation trading and the WTI-Brent spread
Another day, and another widening in the WTI-Brent front-month future spread — this time to what looks to be approaching record wides.
The spread hit as much as -9.50 on Monday and according to Bloomberg data the record for the differential stands at -10.67,
Oil shock 2.0, or, the benchmark wars
Concerns are mounting that $100 oil prices, if hit, could be enough to dislodge the precarious global recovery — thrusting the world economy back into recession, or even worse, into another global financial crisis.
More on the widening WTI-Brent spread
Reuters is running an interesting story on Thursday that throws further light on the widening WTI-Brent spread, which when we last looked was at $6.42 a barrel.
The newswire claims oil trader Hetco has taken control of the first eight North Sea Forties crude oil cargoes loading in February and two Brent cargoes.
On the implications of a widening WTI-Brent spread
The spread between the two main global oil benchmarks, West Texas Intermediate and Brent, is blowing out (again). And it’s been doing so for most of the month.
We’ve known for a long time, of course,
An unjustified WTI distortion?
JBC Energy has picked up on the ongoing problem of the WTI-Brent forward curve disconnect on Wednesday.
In a nutshell, while Brent futures prices have been jostling nicely into a flattish curve structure (and even a touch of backwardation at the very front end),
The (not so) curious case of the 9.85m bbl crude oil draw
Wednesday’s weekly EIA oil inventory data is worth coming back to on Thursday.
Not only did the EIA report an exceptionally large and unexpected crude draw, it turns out the draw was the largest of its kind for this time of year since 1989.
Commodity ETFs: even worse than you thought
The issue of rollover and contango decay in commodity exchange traded products has received a lot of attention in the media.
Bloomberg noted, for example, how many ETF investors were caught off guard when contango hit commodity markets this year — a situation which has eaten into the value of their investments due to the premium paid to maintain a futures position indefinitely.
Considering a commodity investor’s break-even rate
Olivier Jakob analyst at Petromatrix notes on Tuesday that open interest in overall crude oil futures on both the Nymex and ICE exchanges reached an all-time high of more than 3m contracts last Friday:
Brent’s got its problems too
We’ve documented the problems associated with the Nymex WTI crude contract regarding the onset of contango and Cushing syndrome in the US .
But as the CME Group — owner of the Nymex — has pointed out to us (in defence),
When Cushing syndrome strikes…
The WTI super-contango is back, which incidentally also implies the inevitable return of so-called ‘Cushing syndrome’ - a term nicely coined by JBC Energy, as it happens.
On Thursday, US inventory data showed that Cushing stocks — the delivery point for WTI futures – fell last week by 330,495 barrels to 37.6m,
The return of the WTI super contango
The WTI super contango is back — which means time to prepare for price distortions, offshore tanker storage buildup and the general return of evil hoarding oil spivs.
Mwa ha ha.
Okay, to be less sensationalist about it,
A Vix curve ball
Things, it seems, are still looking a bit funny in the world of VIX futures.
Pragmatic Capitalism, for example, wondered on Thursday why it was that volatility futures were refusing to revert to the mean.
The end of diversification?
Back in 2007, the CFTC filed a complaint against Dutch high-frequency market maker Optiver for manipulating energy futures via a practice known as ‘banging the close’.
In 2008, Optiver was charged in connection with the case,
Cushing is full and time-spreads are collapsing
Commodities guru John Kemp at Reuters has again been focusing on full stocks at Cushing Oklahoma and the continuing widening contango, in his latest market commentary.
A bit of background: Cushing is the main physical delivery point in the US for Nymex WTI crude.
Oil contango intensifies as Cushing stocks soar
WTI front-end futures have experienced some extreme price volatility during the past two weeks due to distortions stemming from full-to-the-brim storage facilities at Cushing Oklahoma.
(Cushing is the main physical delivery point for Nymex WTI crude)
Moreover,
WTI Friday meltdown
That’s crude on Friday afternoon, the same day BlueGold Capital Management fiercely denied rumours of company-related liquidations in the WTI market.
Related link:
Bluegold hedge fund denies causing
Bluegold hedge fund denies causing WTI volatility
There are some very intriguing flashes coming out on Reuters regarding the BlueGold hedge fund on Friday:
RTRS-HEDGE FUND BLUE GOLD DENIES IT WAS RESPONSIBLE FOR VOLATILITY IN CRUDE OIL PRICES IN LAST FEW DAYS
RTRS-HEDGE FUND BLUE GOLD SAYS OIL OUTLOOK BULLISH FOR 2010,
Is Cushing souring up the oil market?
Last week both Nymex and ICE began trading brand new oil futures linked to the Argus’ new Sour Crude Index — the ASCI.
The exchanges developed the futures in response to Saudi Aramco abandoning the Platts WTI benchmark in favour of the Argus sour benchmark back in October.
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,