evening wrap
market vibes
January 23 …)
“If you manage to stop the timber industry from cutting this forest, they’ll cut that forest. If you stop oil drilling here, they’ll go drill there.” Woody Harrelson
The most market-relevant part of Trump’s WEF address this morning (afternoon in Davos) was his urgent desire to lower the price of oil. “We have got to get the price of oil down.” And his urgency was not for the US economy.
“If the price of oil were lower this war would have ended long ago. Millions have died on the battlefield.” Trump thinks military deaths are close to 2 million, collateral civilian deaths not included. “It has to stop,” he said, causing palpable squirming among the audience.
Crude prices dropped a dollar, rallied, and fell, closing near the lows on light volume. Open interest has been correlated with prices since September 2024, and it is tracking prices lower now with a reasonable amount of length to liquidate.
(NYMEX March WTI daily data)
March-April is the front spread now. This chart in daily data says a lot about the American oil industry’s attitude towards the Biden sanctions.
As of January 14, net noncommercial length was at a year-over-year high. That number will be lower after turnarounds and maintenance soon and trending down in the coming weeks.
WTI hasn’t been net short since 2010… but it can be.
Net commercial shorts are relatively light at 333k lots (next chart). They averaged 500k short for 4 years pre-COVID, with a low of 800k.
So, the process of grinding the OPEC narrative to a halt and reversing it to a broadly pro-US energy narrative leaves room for a swing of 700K+ lots of short COT positioning in WTI, maybe more depending on capex deals and embedded hedges in credit (longer dated). I don’t see a crash. There aren't enough barrels or length in the system for that. I do see a trend.
Products will follow, but I don’t see them being a big factor. Lower crude prices mean higher demand at the pump and better margins. Being short gasoline, once things stabilize with visible trends, is probably not the best idea.
I saw a clever clip on Telegram, so I put a question to GROK…
The ban doesn’t say anything about the “Gulf of America” …
Next up, wrapping the stock market, gold, bitcoin, corn (yup) corn, bonds, and the dollar. Stay with us!
