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Tag Archives: WTI

A Big One For The Big “D”

From a monetary policy perspective, smooth is what you are aiming for. What central bankers want in this age of expectations management is for a little bit of steady inflation. Why not zero? Because, they decided, policymakers need some margin of error. Since there is no money in monetary policy, it takes time for oblique “stimulus” signals to feed into the psychology of markets and the economy.Thus, a little steady inflation as insurance against the real evil.In that sense, the core CPI is...

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Did Gulf Coast crudes go negative on oil’s most historic day?

When one of the world’s most prolific oil futures contracts plunged deeply into negative territory April 20, S&P Global Platts’ pricing team was faced with the question of whether physical crude outside of Cushing, Oklahoma was also worth less than zero. With no ambiguity, Platts’ methodology answered with a resounding “no”. With the exception of May WTI at Cushing, Platts did not assess any North or South American crudes at negative values that day. CME Group’s NYMEX Light Sweet...

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Lots of talk for little action in big Texas: Fuel for Thought

In an oversized state known for its ingenuity, pride, stubbornness and free-range capitalism, it’s a borderline miracle that Texas is even seriously considering implementing a plan for mandatory oil production reductions. Texas and oil go together like chips and queso, but if there’s way too much cheese, you just end up with a bunch of waste and soggy chips. During the worldwide collapse in oil triggered by the coronavirus pandemic, the contention is that Texas is producing way...

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Cushing WTI price rout leaves US crude benchmark reeling: Fuel for Thought

The oil hub of Cushing, Oklahoma, has overcome times of stress before without losing its prime role in US oil pricing. But when it made history on April 20 with a headlong dive into negative pricing, the potential difficulties of using it as a pricing benchmark for oil trade in other US markets and beyond was highlighted like never before. It’s not unheard of for commodities to trade at negative prices, but for it to happen to crude at Cushing is exceptional. Negative prices have been seen...

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COT Black: No Love For Super-Secret Models

As I’ve said, it is a threefold failure of statistical models. The first being those which showed the economy was in good to great shape at the start of this thing. Widely used and even more widely cited, thanks to Jay Powell and his 2019 rate cuts plus “repo” operations the calculations suggested the system was robust.Because of this set of numbers, officials here as well as elsewhere around the world chose the most extreme form of pandemic mitigations, trusting that the strong economy...

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What Was Monday’s Negative Oil, And Why It Was Overshadowed On Tuesday

A crucial component of many commodity futures markets is a concept called roll yield. It relates to the shape of the curve and therefore how the market is discounting the three fundamental factors of supply, demand, and financing. Contango versus backwardation, there’s a lot to consider and even more at stake.Back in late October 2018, the WTI curve flipped to contango warning everyone not mesmerized by Jay Powell how serious danger wasn’t just approaching it had already arrived. I wrote at...

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20/4/20: Oil

The madness of Oil (see an explainer below): As I said a few minutes back: at this rate, within a couple of days, it will make sense to start re-injecting the stuff back into the wells, as opposed to storing it.An explainer:Quite a number of folks - including journalists - have confused the above data and the 'reported' price of oil today for the actual price of oil. It is not as simple as that. Actual price of oil did not fall below zero, though for some grades it has been below zero...

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What Do China’s LPR Cut & Oil Chaos Share In Common?

For the second time this year, the PBOC has today affirmed Chinese banks are offering a lower benchmark loan rate. The Loan Prime Rate was reformed last August just in time for the monetary authorities in China to make it seem like they are being removed from the decisions. And in time for rate cuts to begin, too. What is the LPR? It is, supposedly, the weighted average rate (after throwing out the highest and lowest) at which eighteen of China’s designated banks will lend to their best...

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A Crude Future View From The Crude Curve

Concerns about the economy have overtaken concerns about the virus. That’s the conclusion reached by a series of polls conducted at fivethirtyeight.com. According to their surveys, Americans remain very concerned about the pandemic to start with. Thirty-eight percent say that, up from about 18% back at the beginning of March.In terms of the economy, 57% are now “very concerned.” That’s more than double the number from early March, and up from 22% in late February.Add another near 30% who...

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Commodity Tracker: 5 charts to watch this week

US oil exports are under pressure as WTI’s differential to Middle Eastern offers narrows, reducing its appeal in Asia. Meanwhile, the gut-punch to global demand from the coronavirus pandemic is playing out across markets, putting EU carbon prices high on traders’ watchlist after last week’s nosedive. 1. WTI loses competitive edge in OPEC+ price war     What’s happening? US crude suppliers could fall victim to the price war triggered by Saudi Aramco’s latest move to...

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