120 is the new 50 (republishing with chart titles...)
market vibes
March 10 …)
in the news
The slugfest goes into day 12 with no signs of capitulation and a reasonable understanding that Iran is going to fight on, notwithstanding ominous escalation in coming days. Lies and propaganda spin through the media daily like orbital satellites shot into the darkness of empty space.
Official mortality figures
Iran: 1,255 killed and over 12,000 injured, according to Deputy Health Minister Ali Jafarian in statements.
Israel: 13-16 killed (mostly civilians from Iranian missile/drone strikes), with hundreds to ~2,339 injured, according to the Israeli Health Ministry as of March 10.
Official U.S. military data: 7-9 service members killed (all military personnel, no civilians reported in combat zones).
the Strait
Limited traffic is moving through the Strait of Hormuz. Hundreds of vessels are anchored in clusters on both sides. Maritime data shows only 2 vessels not linked to Iran or Russia made the “chicken run” since Friday (a few more over the weekend were Iran- or Russia-linked). A Greek Suezmax carrying a million barrels of Saudi crude went through yesterday bound for India.
The G7 proposal to release oil as a group is still undecided. French Finance Minister Roland Lescure (as the G7 presidency holder) explicitly said the group was “not there yet” on releasing stockpiles. That means “no” in French. Since the US SPR has seen significant activity in the last 4 years both in and out, we know if or when President Trump orders a release, oil takes about 2 weeks to get to the market and the max rate is about 4.5 to 5 million bpd.
From that point, location swaps can deliver oil in floating storage in a few days or, depending on the arbs (which Doomberg wrote about today in his latest piece, 90% of the Law), immediately locally for a price.
in the markets
WTI crude futures traded a record 4 billion barrels yesterday, 3,927,051 contracts to be precise. The entire CME energy complex (all energy products) traded 8.3 million contracts (Grok). I could write an entire thesis about this single volume event but I won’t do it this morning. Maybe tonight. Suffice it to say, along with the 8-sigma event I described in the evening wrap last night, echange data is measurable and it has dramatic implications for prices.
In order for a futures market to trade 200% of total aggregate open interest (2,108,374 contracts) or 3,927,051 contracts of volume in a single session, substantially all extant open interest must be active. All longs must sell. All shorts must buy and all open interest from a risk management perspective inverts. Think that through. it’s very important.
All sellers have dominant location at the end of the day if prices are lower by simple arithmetic definition and all buyers have losses or subordinate location. The structure of the market always puts pressure on the weak side of leveraged long-short liquidity. From February 27 to March 8 that was the short side in oil. The weak side of long/short liquidity is the long side on March 10. As the Strait of Hormuz stays closed that dynamic won’t need a VLCC to pass freely into the global oil markets.
When markets are forced by events (credit, crashes, pandemics, catastrophic force majeures, wars etc.) into vertical and parabolic liquidity voids, regulatory guard rails, exchange rules, ISDAs require the deficit positions to secure margin within minutes or they can be forcibly liquidated. This happened recently in silver. It has happened in other markets periodically in the last 50 years.
It doesn’t matter if high-quality collateral is available in a warehouse or a ship. If it is not liquid, a cash call must be met when prices are moving 20% or more in a day. Just ask Dick Fuld.
where does that leave oil prices today?
