DOE numbers today were not bullish. Although crude stocks did not build by much, SFOT was hearing seasoned professionals in equities, exotics, fx etc shouting, " oh look at the draw in distillates" and "oh its only a 1.6mio bbl build in crude". Notice in the physical trading window time ( London 4pm-4.30) that prices went to the lows. That was a telling sign the punters were buying blind, technical indicators broken to the upside for the intraday boys and more buying came in. The only guys that matter(physical trades) could only sell it down a mere 50cents.
With regards to the distillate draw, yes, diesel stocks had a decent draw, which is pretty interesting and SFOT will attempt to find out where this is coming from. However, given the bulk of the draw is diesel, and economics suggest European diesel was very well supported, SFOT suspects that the draw has a lot to do with exports to Europe, potentially for storage purposes.
More of these tomorrow, however, today's close shall be watched closely for if it stays above $50 in CL1, i'm afraid the shorts maybe prepared to throw in the towel and perhaps take it towards mid or high 50s very soon.
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hopped over here from Macroman's, I think you ahve to look at the fact that Cushing Inv. have decline from 33.9 to 30.0 in last 4 weeks, and that could also be supporting prices (for now) + "inflation premium"
ReplyDeleteI do think it will lead to a false dawn though, because, any draws at cushing can be easily filled from the still many barrels out offshore ready to sold into the markets.
Thanks Anon. I was purplexed by the same. Over the last 4 weeks, Cushing inventories have been consistently down.. I couldn't find historic data going even further back for Cushing terminal. The same seems to be the case in the Western terminals.
ReplyDeleteDo you have access to comparing this information to crude price action?
SFOT, for the price action, I am under the impression we are stuck in the 850-800 channel on equities. I dont think we can go any higher than that. Having seen European price action on crude, I figured it was the best we could do on the shorts, so got out of the put verticals before the numbers. A nicely profitable trade, but felt like I was fighting against the tape every day over the past 3 weeks.
Will look into rolling the same short delta trade into May contract with some decent vols. I am hoping we uptick on the vols given OVX has been on a consistent downtrend. Its wait and see time for me.
thnaks for your comment back, I don't think Cushing inv. to spot price is relevant before Dec- Jan 08 , part of the reason for substantial buildup in Cushing stocks was a reputed problem with one of the pipes through which supplies outflow, that having been fixed about a month ago, has allowed for some clearing of stock ..
ReplyDeletebut that said again, there is still a lot fo offshore suppplies which can be brought in to plug the mkt
interestingly enough, WTI- again at premium to Brent, as well widening of the forward curve,
"tight compliance" is irrelevant right now, as it would take well over 2 qtrs to really bring a change in terms of supply in the mkt- not just in terms of OECD inventory volume, but also the forward demand cover down to 52 days- to sustain any $60+ price
"strong complaince" is a factor OF weak demand, NOT , well intentioned reduction in supplies (esp. out of Iran)
-Aman
P.S. Kudos on the blog
Interesting article on who the big dogs on the contango trades are:
ReplyDeletehttp://www.bloomberg.com/apps/news?pid=20601072&sid=a6ZO9_.6eDDQ