Back month call buying in WTI options…

by Jim Colburn • Friday, March 16, 2018

The CME has an excellent tool to track options activity… Typically, most activity takes place in front month options.. Yesterday, the top volume calls were in Dec18, March19 and Jun19, $80, $85, $85 strikes… Could the buyers of these be influenced by the recent IEA and OPEC monthly oil reports that suggest a tightening of supplies later in 2018?  Here is the CME link:



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The IEA bumps up expected oil demand a bit…

by Jim Colburn • Thursday, March 15, 2018

The IEA’s monthly Oil Market Report is out… Here are some highlights:

Expect stocks to draw slightly as we move through 2028:

Demand growth revised higher (but still on the low end of other estimates):

“Looking at demand, our estimate for global growth in 2018 has increased by 90 kb/d taking it up to 1.5 mb/d. Although this is a modest revision, it is interesting that provisional data suggests very strong starts to the year in China and India, which, taken together, accounted for nearly 50% of global demand growth in 2017. Cold weather in some parts of the northern hemisphere in January-February saw an increase in heating demand.”

”We retain our view that total non-OPEC production grew by 760 kb/d last year and that it will surge by 1.78 mb/d this year. Within the OPEC countries, the biggest risk factor is, and will likely remain, Venezuela. Our estimate for February shows output down again, by 60 kb/d. Other countries with a risk factor include Libya, and, to a lesser extent, Nigeria. In Libya, we saw another modest supply gain in February to 1.02 mb/d and, although stability cannot be taken for granted, it appears that the frequency and severity of production interruptions is declining and higher rates of output are being maintained. Taking OPEC as a whole, quota compliance in February was 147%, but even if Venezuela’s production were at its allocated level, the group’s compliance would still be close to 100%.”


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US 10 year notes vs equities…

by Jim Colburn • Wednesday, March 14, 2018

Here are some interesting charts from Bloomberg which compare yields of US Treasury 10 year notes to the S&P 500:

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OPEC’s Monthly Oil Report is out…

by Jim Colburn • Wednesday, March 14, 2018

You can download it here..

From the summary page, the call on OPEC oil is slightly lower in 2018 due to a large non-OPEC supply increase (which offsets a hefty increase in demand):

Here is more on non-OPEC supply growth:

Note how 3Q and 4Q demand picks up:

And here is OPEC’s current production levels (the column Feb17 should be labeled Feb18):

Note the continued implosion of production levels in Venezuela… And note the difference of current OPEC production and the “call” on OPEC production in 3Q and 4Q of this year (labeled “Difference (a-b)” above)…



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Venezuela’s rig count… EIA

by Jim Colburn • Tuesday, March 13, 2018

Not looking good… From the EIA:

And here is oil production:

“Venezuela’s crude oil production has been on a downward trend for two decades, but it has experienced significant decreases over the past two years. Crude oil production in Venezuela decreased from 2.3 million barrels per day (b/d) in January 2016 to 1.6 million b/d in January 2018. A combination of relatively low global crude oil prices and the mismanagement of Venezuela’s oil industry has led to these accelerated declines in production.”



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Calendar spread options, WTI

by Jim Colburn • Tuesday, March 13, 2018

In early February, some deep out of the money put buying occurred in the April/May, May/June and June/July (also, the expired March/April)  0, zero, put option, probably by one trader… The buyer was expecting or hedging against the WTI curve slipping back into contango…  Here is a picture of the most open interest in spread options from the CME:

And here is a recent chart ( of the April/May spread:

If we slip deeper into contango, I may have to revive my “Option Trade of the Year” award…

We discussed this trade in our March podcast…


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The Growing Significance of American Oil

by Andrew Lebow • Sunday, March 11, 2018

Nice summary from Fox Business on the growing importance of American oil production:

The U.S. is becoming an increasingly dominant player in the global oil industry, and according to the International Energy Agency (IEA), this trend will continue, with the Paris-based organization forecasting the U.S. will overtake Russia to become the world’s largest oil producer by 2023.
The U.S. shale oil boom has resulted in a new supply of low-cost, high-quality oil, and BHP is looking to shed a number of U.S. assets, including fields in the Permian basin near Midland, Texas. According to Andrew Lebow, a senior partner at Commodity Research Group, Permian basin assets are about as prime real estate as you could have in the U.S. when it comes to oil assets.

He likened them to, “Park Avenue, in terms of New York real estate.”

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US oil exports… EIA

by Jim Colburn • Friday, March 9, 2018

The EIA’s “This Week in Petroleum” has a nice piece on US petroleum exports here

“Exports grew to 1.1 million barrels per day (b/d) in 2017, or 527,000 b/d (89%) more than exports in 2016, in the second full year of unrestricted U.S. crude oil exports. ”

By destination:

The WTI/Brent price differential was an incentive to move US barrels to export:

Spot Brent crude oil prices averaged $3.36 per barrel (b) more than WTI prices in 2017 compared with just $0.40/b more 2016, providing a price incentive to export U.S. crude oil into the international market.”




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Our March podcast on Energy Markets…

by Jim Colburn • Friday, March 9, 2018

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Global gas market, trading companies… FT

by Jim Colburn • Tuesday, March 6, 2018

Here is a nice piece by the Financial Times on a growing international gas market:

The authors, Emiko Terazono and Anjli Raval, write this:

Here is an overview of the market:

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