All better now. It’s a Christmas miracle, the plunge erased by market closure as if FDR had just been re-elected and taken the oath. The Dow is on everyone’s mind, so trading on December 26 has understandably stuck. Stocks posted their best day in nearly a decade on Wednesday, with the Dow Jones Industrial Average notching its largest one-day point [...]
Why aren’t more people talking about this? It’s a huge development and nary a peep anywhere. The mainstream media is filled with baited expectations for 3% wage growth on Payroll Friday. All eyes are on the labor market, which is a lagging indication, instead of on the oil market, which is forward looking. As of this writing, the futures curve [...]
There is an interesting, ongoing academic debate about what shape the crude oil futures curve “should” take. Quite naturally, it seems backwardation is the market baseline. Most people, I think, presume otherwise because of their familiarity with commodities like gold. Backwardation in that market implies a physical shortage. Unlike that precious metal, crude oil is a usable commodity whose value [...]
During the week of February 21, 2017, Money Managers (MGR) in the WTI futures market went all the way for higher oil prices. The CFTC Commitment of Traders (COT) report showed a then-record 405k net to the long side. For whatever reason(s), oil prices didn’t necessarily follow at least not in the same nearly direct manner as they had in [...]
Back when the WTI curve was at its steepest contango, who was it that was buying up all that oil? A sheer vertical curve is an invitation to almost free money, very much like other curves everywhere else during the “rising dollar.” You could simultaneously buy crude at spot and sell it for delivery years ahead using a futures contract, [...]
For the first time in three years, oil inventories in the United States are not rising precipitously more than the seasonally expected. At the start of both 2015 and 2016, oil stocks exploded higher as oil prices crashed, all related to the “dollar” flex on the front end of the futures curve creating sufficient contango necessary to strip that oil [...]
While there is a direct relationship between the steepness of contango in the oil futures curve and the amount of crude siphoned from the market to storage, it is not an immediate one. When crude prices originally collapsed starting in late 2014, twisting the WTI curve from backwardation to so far permanent contango (of varying degrees), it wasn’t until January [...]
When analyzing the full and true nature of the dissonance between the idea of continued recovery and the financial markets’ scenario for something much worse you realize that this is not a new occurrence. In curve after curve, negativity has been building for years. Financial curves are important because they tell us the health of the monetary economy, namely assumptions [...]
Like industrial production, the condition of oil inventory in the US was updated today in contradiction of the expectations driving Federal Reserve models expecting “transitory” weakness to simply pass into history. Unlike the virtual conditions for the FOMC, crude oil markets are obliged to respect both the eurodollar and the physical realities of physical commodities. Last week, the US EIA [...]
Crude oil prices are exhibiting all the signs of an increasingly difficult funding environment. The front end of the futures curve is being bent dramatically in relation to even close maturities just outside the next few months. Such contango is the obvious imprint of finance, though that is not to say that economic expectations are neutral in the curve. Far [...]
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