cancel
Showing results for 
Search instead for 
Did you mean: 
hardnox604008
Advisor

dispatches from whacko world

Trying to make sense of the action in crude oil and here is my suspicion, hear me out.

 

OK, we have the highest US gasoline stocks for July in three years. Crude market is also well supplied but supply suddenly began to drop sharply a couple of weeks ago. Simultaenously tanker rates rose.

 

WTI is now premium to Brent as opposed to a discount of as much as $23 not too long ago. Remember, the oil story is that it's all about new US supplies, crude gluts at Cushing, etc.

 

Sooo... if crude is going onto floating storage on tankers, that has certainly happened before. But in the past it has been because of good carries in the futures market- basically storing the oil and hedging a carry like a grain elevator. But the oil market is sharply inverted so that doesn't work.

 

Somebody wants badly to get their hands on near term supply.

 

It could be some form of purely financial gamesmanship- just playing the Brent/WTI spread or such. Which is in itself troubling but don't expect the sheriff to do much for you, that is so 20th century.

 

But I'll submit the other possibility that occurs to me- there are geopolitical concerns but not that I can see as being greater than what has been ongoing for a few years. I'm thinking that somebody knows somehting is getting closer to going down over there.

 

Not even sure what a blowup and sharp increase in oil supplies would mean for grain marketing but I would recommend that, as always, it is a good idea to not be too sure of anything, because stuff happens.

0 Kudos
6 Replies
BA Deere
Honored Advisor

Re: dispatches from whacko world

Well, the stock market opens at all time highs everyday, unemployment is in a free fall, the deficit is going to be turned into a "surplus"...things are booming.  That means Ma and Pa load up the kiddies in the LTD station wagon and head for the Grand Canyon and Disneyland.  Why Bernanke has to keep buying $85 billion/mo in bonds is beyond me, little Timmy is ready to have the training wheels taken off, if things really are this rosey 🙂

0 Kudos
hardnox604008
Advisor

Re: dispatches from whacko world

I think your tongue is planted firmly in cheek but of course oil demand remains pretty punky.  As do retail sales, restaurant takes, other measures of disposable income spending.

0 Kudos
pritchh
Senior Contributor

Re: dispatches from whacko world

How to say this. It is easy for us to feel small in the what seems like wild world of finance, world trade, commodities. 2. if we have a negative nature, we may then look for a conspiracy under every rock to explain the unexplainable. 3. In the everything is bad/gloom/doom niche cult, no only is China ruining us everyday, the NYSE is a complete hoax everyday and the M-E is going to blow up every day.  Does that stem from good cognition or a need to see things blow up and get satisfaction that one was right once in 30 years.

 

CL HO HU stks have been plentiful for some time, though keep in mind their total is a smidge relative to what we use in a yr. vs  gold, every oz ever mined =s supply. And the plentitude has not affected price.

 

The world economy is ok, no great growth but ok. Emerging economies are still growing at 5% + rates.

 

If, shhhh,  “some” biggie with inside dope  KNOWS,   might teen he be long derivatives and listed ?

 

4. many situations create and we have no idea what is up, and find out some day or oft, nothing happens.

 

For sure, if you are right, some oil related geopolitical blowup is about to happen, you want to be short crude oil. Or long puts. For it would be bearish. 

0 Kudos
pritchh
Senior Contributor

Re: dispatches from whacko world

What if the world isn't whacko?  but the observers are?  The economy dipped in '08 '09, and is dull but is still, 15.5 TRILLION. What is out my door or in the town next door really means nothing.  There are immense things going on at research universities, many areas of the economy and the world are booming.

 

Most companies are making record profits, they have been borrowing in bonds are record rates. The public is massive 

 

 

0 Kudos
hardnox604008
Advisor

Re: dispatches from whacko world

Are you really Alan Greenspan?  Sounds like one of his sessions with Congress.

 

He later said that he really couldn't have imagined that individuals would destroy the institutions that they worked for merely because they had financial incentives approximately equal to the GDP of small countries.

 

Becasue markets are efficient?

0 Kudos
hanktbd
Senior Contributor

Re: dispatches from whacko world

Hardknox, Same conundrum has been rattling around in the back of my mind for a while also. I often find that what I don't understand has the opportunity to bite my backside later. Wondering if the new pipeline from Cushing to the Gulf ports has begun operation and WTI price has risen to match World demand levels rather than midwest refinery demand levels. That might also explain the increased tanker pricing. If so, the effect is likely long term. Negative for the general economy, but positive for ethanol and corn prices.

0 Kudos