stupendous oil duds and a 700 price earnings ratio
market vibes
July 5…)
in the news
Trump goes to NATO. If you haven’t noticed the war in Iran is over so, Ukraine is back.
GS sees USD/JPY at 165 this year. They like the carry trade (favorable US assets), say BOJ intervention won’t work with high US rates.
Managed money accounts continued to reduce bullish Brent crude bets in the week to 30 June, cutting the net long by 38% to near a historic low of just 55.6k contracts, down around 87% from a March peak of 429k. CFTC reports COTs tonight due to holiday weekend, according to Ole S. Hansen.
Oil futures per se have never been short. Meanwhile in China…
In the circus maximus, England and Norway advance. US vs Belgium tonight in Seattle. Wimbledon has been excellent. Djokovic is still in it.
in the markets
Equities are quiet and featureless. Banks begin reporting earnings on July 14. The interest rate narrative is off the radar. There’s a whiff of life in silver but nothing technical to confirm it. Oil is utterly petrified (no pun intended!) so let’s focus on oil.
Refining margins are making new highs (chart below). What most people do not understand about marginal profit is that it has zero directional value as an indicator. Today, gasoline isn’t going up... oil is going down. But tomorrow, oil could be going up and gasoline going up faster. Or both could be going down and gasoline going down slower. Refining capacity never changes which is why margins are at all time highs.
The reality is… the supply of oil has gone up dramatically. Where is the tank top? I don’t know. Watch demand in bull markets. Watch supply in bear markets. It’s not hard to see what is coming. It is hard to stop it once it starts.
