US Gulf refiners rumble back to life… Reuters

by Jim Colburn • Tuesday, September 12, 2017

Erwin Seba and David Gaffen At Reuters do an excellent job explaining some of the many problems getting refineries restarted here… The article gives one a sense that it will be a while before refineries are back to running at pre-Harvey levels (seasonally adjusted)…  Here are just two potential problems:

““Any time you have water in a refinery you have to do lube checks on every instrument, which is literally thousands of checks,” Gary Simmons, senior vice president of supply and operations at Valero, told a conference last week.”

And, this:

“A major concern, according to sources familiar with operations there and at other refiners, is whether the pumps that supply the crude to the refinery will run successfully after being underwater for several days.”




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“Fischer Black’s classic essay “Noise””… via Marginal Revolution

by Jim Colburn • Monday, September 11, 2017

Here is the abstract:

“The effects of noise on the world, and on our views of the world, are profound. Noise in the sense of a large number of small events is often a causal factor much more powerful than a small number of large events can be. Noise makes trading in financial markets possible, and thus allows us to observe prices for financial assets. Noise causes markets to be somewhat inefficient, but often prevents us from taking advantage of inefficiencies. Noise in the form of uncertainty about future tastes and technology by sector causes business cycles, and makes them highly resistant to improvement through government intervention. Noise in the form of expectations that need not follow rational rules causes inflation to be what it is, at least in the absence of a gold standard or fixed exchange rates. Noise in the form of uncertainty about what relative prices would be with other exchange rates makes us think incorrectly that changes in exchange rates or inflation rates cause changes in trade or investment flows or economic activity. Most generally, noise makes it very difficult to test either practical or academic theories about the way that financial or economic markets work. We are forced to act largely in the dark.”

Here is the link:

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Katie Stockton, technical analyist talks to Barry Ritholz

by Jim Colburn • Monday, September 11, 2017

Katie Stockton, chief technical strategist for BTIG in New York City, talks technical analysis with Barry Ritholz here:


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Texas Energy Industry Recovering… NYTimes

by Jim Colburn • Saturday, September 9, 2017

The NYTimes isn’t usually the go to place for articles on oil, but this is a good one:

“The port of Houston and the state’s other major ports are almost back to normal operations, oil and gas production in South Texas is quickly ramping up, and eight of the 20 refineries that were totally or partly closed because of the storm are operating at normal levels. Eleven of the 12 other refineries that were affected are preparing to restart.”

Quoting Tom Kloza: “”I think we’ve probably run the course in terms of the price reaction,” said Tom Kloza, global head of energy analysis for the Oil Price Information Service, in large part because refineries are rapidly coming on line and Hurricane Irma does not threaten any refineries at the moment.

“There is tremendous motive for refiners to return, because you are talking about profit margins for gasoline twice what they were a year ago,” he added.”

“But the storm could have an impact on supplies if it damages or otherwise shuts down operations at Buckeye Partners’ storage hub in Freeport, Grand Bahama Island. The facility, with as much as 26 million barrels of crude and products in storage, is a strategic center for blending and transshipment operations for petroleum trade between the Gulf of Mexico, the East Coast and even markets in Europe, the Middle East and North Africa.”

I’m not as optimistic as the article, but it is a good read:





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This Week in Petroleum… EIA

by Jim Colburn • Saturday, September 9, 2017

The difficulty for the EIA in gathering good data due to chaos and disruptions caused by Harvey is summarized by the EIA in “This Week in Petroleum“:

“Because of the displacement, evacuations, and other safety measures initiated as a result of the Hurricane Harvey, some respondents to EIA’s surveys may not have been able to submit data within the reporting window. EIA has and will continue to work diligently with respondents to ensure robust and accurate statistics.”

Note that in the recent release of the “Weekly Petroleum Status Report“, PADD III (the area which includes Harvey’s path) gasoline stocks are reported at 82.4 million barrels exactly the same as the previous week!

Here are some charts from “This Week in Petroleum”:


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On timing markets… Ritholz

by Jim Colburn • Friday, September 8, 2017

Barry Ritholz has a nice piece on the difficulty of market timing here

“Still, it points out the challenge of trying to explain day-to-day movements of markets. Therein lay one of the challenges of market timing.

There are other difficulties as well:

Behavior: We begin with where so many things go awry for investors, namely their own inability to be rational and disciplined. To successfully jump in and out of markets, one must rely on a specific set of rules. History informs us that relying on one’s gut or intuition may result in the occasional lucky call, but it is neither reliable nor consistent. Most people tend to succumb to their own physiological responses to losing money by doing whatever to just makes the pain stop. Easy trades are rarely lucrative ones.

Contrarian: There is a two-fold challenge to making a contrarian market call. The first is that most of the time, markets more or less get it right. Markets are kinda sorta eventually efficient. All of the various clichés you hear — “wisdoms of crowds; don’t fight the tape; the trend is your friend” — is essentially an acknowledgement that pricing is mostly rational.

The second challenge is in precisely identifying when market participants have morphed from a crowd to a mob, exhibiting either extreme fear or extreme greed. But that’s what a good contrarian timer has to do.

Every Cycle Is Different: How have the dominant elements this cycle — high-frequency trading, the rise of indexing, ultra-low rates, quantitative easing, exchange-traded funds, etc. — impacted markets? I have some ideas, but nothing I really want to wager money on. It surely would be helpful to timers to understand how these and other elements impact market moves.

Don’t misunderstand what “It’s different this time” actually means: It refers to the trading error that fails to recognize human behavior is immutable and unchanging. However, market structures, investing products, firms and even trading tools do evolve and change. Don’t confuse the two.

Clustering: Perhaps the biggest challenge is that the best and worst days tend to come close in time. The reason for this is that big selloffs or huge rallies lead to wildly overbought or oversold conditions. The rubber band gets stretched too far and has to snap back.

Given the relative proximity these big days have on the historical timeline (see below), and how often these occur back to back, there is little room for error. Getting most but not all of the timing right could lead to missing the big recovery or getting caught in a damaging selloff. That has the potential to seriously impact returns.



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Gasoline prices in wake of Harvey… EIA

by Jim Colburn • Thursday, September 7, 2017

In “Today in Energy” the EIA shows Harvey’s effect on retail prices:

and, compares Harvey to previous hurricanes:

Here is the link:

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Timing is everything…

by Jim Colburn • Wednesday, September 6, 2017

Robert Schiller, Yale professor says bitcoin is the best example of a bubble… Here is Business Insider:

“The cryptocurrency is “the best example right now,” Shiller told Quartz’s John Detrixhe in an interview published Tuesday. In January 2014 at the World Economic Forum in Davos, Switzerland, he called the cryptocurrency “an amazing example of a bubble,” adding that there was “no question about it.”

Bitcoin has exploded in price and popularity since then. Bitcoin was at $4,337 on Tuesday, or about 442% over its price in January 2014 of about $800 a coin.”


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Inflation, expectations… WSJ

by Jim Colburn • Tuesday, September 5, 2017

Here is the Wall Street Journal covering inflation:

“Implied inflation expectations, derived from the differential between nominal and inflation-adjusted Treasury yields, are forecast to be 1.79% annually over the next decade, according to data from Tradeweb. That’s down from over 2% earlier in the year.”

Here is the link:


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Natural Gas Looks Hurricane-Proof… Bloomberg

by Jim Colburn • Tuesday, September 5, 2017

When teaching options, for years I used the hurricane approaching the Gulf of Mexico as an example of why someone might buy a straddle… If the storm enters the Gulf, gas production would shut down, prices would surge… If the storm veers off, prices move lower… But now natural gas prices barely move due to more onshore production of natural gas… Here is Bloomberg:

“U.S. energy markets, efficient as they are, have already begun pricing Hurricane Harvey’s effects. With refineries and pipelines out of service, gasoline futures have spiked. So far, however, natural gas futures have hardly responded to Harvey, and it may be another week before they do. One thing is certain: The U.S. gas-production sector has changed drastically in the 12 years since Hurricane Katrina.

From Aug. 1 to Sept. 30, 2005, thanks to Katrina, gas futures prices rose 70 percent. But changes in the production landscape have created a less reactive market this year. The gas-production system isn’t hurricane-proof, by any means, but it is more widely distributed than it was.

Here is the link:

And, from, here is a chart of recent natural gas prices:



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