Various thoughts
"Due for an oil change" by Alyosha745
April 24 ...)
In the news
Philip Grant quotes Luis de Guindos ECB VP in le Monde yesterday, "[If} things keep going this way, we will cut in June." The BOJ was wolf calling about intervention again last night. Elsewhere in Asia, China's credit yields drop to record lows. Corporations in major economies are selling record amounts of debt, including KRW and JPY (BBG). This sheds light on the enigmatic localized Asian rally in gold and silver, I think (chart below).
Trade houses, including Mercuria, Trafi, Vitol, Gunvor et al, are turning an acquisitive gaze towards the LME where for years trading budgets have been whittled down to a yoga heartbeat. Apparently, the price of intellectual capital in metals is going up. This is not just bullish for the wages of sales and trading people but bullish for metals, imo. If you hire an army and give them weapons, a war cannot be far off.
Here is a picture worth a thousand words (ty BBG): weak RMB (yen, KRW, etc.) and gold. Boom.
In markets
Volatility in ETF holdings of silver is becoming a thing. Which fits, I think... Gold ETF AUM remains steady on trend. Although China is having a gold party and the American financial view of gold is outright puritanical, it doesn't detract from the relative performance in all currencies including the buck. I doubt this ETF void of gold AUM will endure. T debt is forecast to be + 37 or 38 trillion by 2025 and the long fangs of "higher for longer" will sink into a spiraling urgency to service it. Whatever rates do here, Asia, Europe or Pago Pago, the issuers are committed to refunding ad infinitum with no expectation of repayment, ever.
Oil for a change
We await DOE stats today with anxious anticipation at 10:30, a survey as useful as measuring the length of your lawn both before and after you cut it. Despite the Houthis and the ghastly conflict in Gaza that no one has ever been able to solve since Balfour's brain fart on November 2, 1917... I refer to you Frank Hebert's thriller, Dune: "The spice must flow."
Here is heating oil, the current dog of the complex, offering a perfect example of undulant nothing and trading at the same price it traded in 2005, 2008, 2010, 2014, 2018, and 2022. When it is most useful, it is usually 20% more expensive. Buy it today and sell it in December.
Here's the spot gasoline crack ((RBE*42)-CLE)). It's a notional expression of the relative value of a barrel of rbob to a barrel of WTI, which no refiner can produce but it gives you a sense of where the money is in the barrel if they could. As you can see refiners are making a notional 30.50 gross profit on rbob.
Here's the heat crack, making multi year lows. Still a notional win but it's a drag on crude. My sniff is with summer coming and the economy adapting well to "higher for longer", Transporation fuels, especially diesel can do better. They don't ring a bell ... as they say.
My vibe
Oil is a market where no one is happy these days except arbitragers and according to reports they're making more money than ever. Specs and investors, not so much. Even the cartel is constantly calibrating if quotas are even working meaning, is a cuts policy worth more than max bpd? Why prop the price if Biden is going to sell his reserves cheaper? Personally, I think with 13 mm bpd and a robust local industry sporting 2 centuries of nattie consumption, the SPR is a dinosaur. Does Norway hold an SPR? Russia?
Recently Aramco was considering another go at max bpd, or they threw it out there but did nothing. And it's been reported that KSA announced in January it is building capacity to 13 mm bpd by 2027. That is so not cutting. At the last JMMC meeting scheduled OPEC cuts, both agreed and voluntary, will remain until Jan 2025. But the mere fact the world's biggest producers are cutting says there is too much oil. And there is a palpable weariness with about 6 mm bpd of exemptions (half of it Iran) and subsidizing non-OPEC producers... like America.
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