Commodity Research Group (CRG) is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct hedging strategies.
In this podcast, Andrew Lebow and Jim Colburn discuss the latest economic trends and supply and demand factors affecting oil prices.
About the Experts
Andrew Lebow has been involved in the energy derivative area since 1980. He began his career with Shearson Lehman Brothers where he worked in the initial formulation and marketing of the NYMEX WTI crude contract in 1983 as well as the NYMEX gasoline contract in 1985.
Mr. Lebow has appeared before the State Government of Alaska as well as the State Department of Defense to discuss hedging techniques. Mr. Lebow is also well known as a market analyst and is quoted frequently in the financial press. He has appeared on television on CNBC, NBC, CNN, CBS, and PBS. Mr. Lebow holds a BA from Lafayette College and an MBA from the Kellogg School of Management at Northwestern University.
Jim Colburn is a futures and options professional with 30 years of wide ranging experience in commodity markets. For much of his career, at Man Financial (1989-2011) and Jefferies LLC (2012-2013), Mr. Colburn worked with major integrated oil companies, hedge funds, pension funds and other entities to develop market hedging and trading strategies.
He has conducted trading, hedging and risk management workshops in energy markets worldwide.
Mr. Colburn is a published author on options trading, hedging, market making and risk management. In 1986, while at the New York Mercantile Exchange, Mr. Colburn helped develop new markets in energy option contracts by educating the oil industry, banks, floor traders and brokers, worldwide.
Speaker 1: (00:00)
Good morning. This is Jim Colburn of commodity research group. I’m here with Andy Lebow also of commodity research group and we’re here to talk about energy markets along with Ed Meir. Andy and I founded commodity research group, which consults on various aspects of commodity markets including metals and energy. Check out our website, commodity research group.com where we post our monthly commodity reports, our daily metals reports, our blog and our podcast commodity research group.com. Thank you. And I would like to thank our friend Doug Stetzer at EKT interactive oil and gas training for hosting this podcast. Doug writes a daily news letter, uh, puts up podcast and learning modules and you can check out all this stuff that EKT interactive.com today is January 13th. So Andy, I think, uh, what’s on everybody’s mind is OPEC compliance. Can you just, uh, give us a rundown on what your, uh, hearing what you’re reading, what you’re seeing about how that’s going?
Speaker 2: (01:15)
I think OPEC compliance is actually going pretty, pretty well so far. Saudis have said that they’ve, they’re under 10 million barrels a day and that’s starting from 10.5 and they took, they are also saying they, they may even go lower in, in February. So that’s a plus. I think Kuwait and the UAE are, I’m in line to, to pretty much make their cuts. But again, those are mostly expected that the Persian Gulf producers would be in line on the cots, but they, it looks as if they have caught, there are other, the smaller producers that are, that have said they’ve, they’re complying, but um, that, that’s not not, so that was not so certain. I think that on the, um, on the noncompliance side, Iraq, which we had always questioned on where they’re going to be, uh, has yet to start complying with, with their cuts. They had a record exports out of the, out of the south, um, in late December, early January.
Speaker 2: (02:20)
It looks like February is going to be pretty strong from Iraq. So, um, we’re, we’re not really seeing the compliance there. And Iran is not part of this agreement. They are a liquidating their, their storage. They’ve said to VC have sold over 13 million barrels from storage and are aggressively, uh, out marketing. But again, they’re not part of the, uh, they’re not part of the agreement. But overall, I, I think compliance and I think net OPEC production, um, looking at looking at those two factors, one, I think compliance is going to be overall okay. Like percent are compliant. I think net OPEC production is probably going to drop from 34 millions is something like 33.2 or 33.3 as a Irfan Libya and Nigeria may maybe able to get some, uh, extra barrels out. But um, yeah, so I think the cuts will be some somewhere around 900,000 barrels a day,
Speaker 1: (03:30)
which leads to an incentive for us oil producers to increase as well. Is that, that’s going to cut into that number in terms of an overall picture.
Speaker 2: (03:43)
Yeah. Uh, and we saw it last in the last weekly report. Production was up by 180,000 barrels a day. Now, this is, this is, um, as a result, I think that it says a result of higher prices in the, during the fourth quarter, which allowed producers to hedge into the first, second and third quarter. Um, and they have taken advantage of the high prices to hedge tremendous gains in efficiencies in, in Permian Basin. Uh, some of the drilled but uncompleted pleated wells coming back. So a US production is all is up 200 a day. Now, you know, if you look at OPEC production, let’s say it’s 33, one 33, two, and the call on OPEC crude, um, is somewhere around 30 to eight. Um, you know, that that would presuppose a surplus. But that call on OPEC crude does not include a 200,000 barrel a day increase in us production. So
Speaker 1: (04:47)
big. That’s a big swing. Yes. Interesting. You just, speaking of the, uh, uh, a report came out I think Monday, um, they’re showing world demand, uh, up 1.6 million barrels for 2000 of 1.4 for 2016 and then up another 1.6 for 2017. And I was wondering what your thoughts were on that number. You are you in line with that or you, you above it?
Speaker 2: (05:19)
I think it’s a little, I think one six is a little optimistic. I think it’s going to come in closer to like one. I think it’s going to come into closer to 1.32 to 1.4. Um, the EIA has a pretty good growth for a US demand. I think it was like 300 a day for s for 2017. I think that’s going to be more like 200 a day. And certainly this is a, a lot of, um, a lot of uncertainty on where a Chinese demand is, is, is going to come in. So, uh, and obviously the uncertainty on, on global growth, et Cetera, but I think the one six, this was way too aggressive.
Speaker 1: (06:04)
Yeah. I mean they seemed to pencil in plus 300,000 for China in 2017. And they, and they have a big, this was the first month they had numbers for 2018, you know, take them for what they’re worth, but they also have China up 0.3 or 300,000 barrels a day as well. It just seems like China’s always a wildcard, but right.
Speaker 2: (06:28)
You know, had a good year, great year and 15 pretty good year in 16 demand growth. And then we’ll see if that, if that’s going to continue. And then of course, you know, the bigger macro picture on what’s effective of a stronger dollar on, uh, you know, in global demand, particularly for a merchant markets. Um, so yeah, I think that’s one six is too high.
Speaker 1: (06:54)
So the, so the 70, 70%, 75% compliance by OPEC, uh, seems to have effectively taken away the floor or, or sorry, put in a floor for this market and we’re, we’re hanging out around, you know, 50, $55 for a while now. And I’m just, um, I want to get into the prices. Uh, um, first of all, what do you, what do you think going forward, like short term you think will stay in this range, and then also could you comment on the risks to your, to your price expectations? So for example, um, we just talked about the man you think they have, the numbers are too high as is, it is,
Speaker 2: (07:38)
well, at least for the numbers of the ias are a little bit lower.
Speaker 1: (07:43)
The Ias are a little lower. Okay. Basically, what’s, what’s, what’s your price outlook for the next say, uh, for the first quarter, say, and then, uh, what are the risks that are involved in that? Like, what could,
Speaker 2: (07:56)
well, in our a monthly report with which just came out, um, early, early this week, um, we were a little bit more, I think we were more bearish than, than what the, uh, than what the market, um, has been saying. Uh, we were looking for first quarter to actually be a little bit soft a with a potential break of, of $50 on Wti actually get, I think a 47 48 was our, our low for the first quarter. Uh, and Brent maybe breaking 50, 50 as well in our idea on that was the fact that, um, these cuts would, at least the non OPEC cuts would be, uh, a little bit slower to come come about. And we saw a hundred a day cut from Russia, but that was due to cold weather. UH, Russia probably won’t be complying to the, to the, to their part of the deal until later in the later in the second quarter.
Speaker 2: (08:58)
The other big, the big issue that just is not going away is the, um, inventories. Uh, we still have been unable to really start seriously drawing inventories. I mean, there might have been a slight global draw in the third quarter of a, I think fourth quarter was up and a, the u s inventories just, just fail to draw. And, uh, you know, we still need to work through a lot, a lot of, um, a lot of product, a lot of both crude and products, I think to get this market, uh, on bet, on better footing. So I think in terms of prices in the market spike there early in the year, you know, frustrating, they had spiked a and has been very, um, optimistic about the, uh, about the OPEC production cuts. Uh, but I think that, um, you know, it continues to be slapped in the face with, um, some of these inventory numbers which are highlighted in the weekly report, which I’m sure we’ll get to.
Speaker 2: (10:02)
Um, now having said that, I think, you know, we are going to start, as we move closer, we’ll be looking into the third as we move into the second quarter, we’ll be looking into the third quarter with the potential for uh, some, you know, some sustained stock draws and the market should, should be optimistic about that for a reason. Because if a OPEC is able to stay at these production numbers, we are going to draw stocks in the second half. And you know, I think at that point the market can move right back up to maybe, um, you know, maybe high 50, slowly, even low sixties. Um, depending on how, how compliances, uh, the big unknown there of course is the rollover. The next OPEC meeting is May 25th. So, you know, we’ll see. We’ll see where we’ll see where these, where OPEC and Nano pick our co.
Speaker 1: (11:05)
Let me just make a couple of comments. The Eia talked about, uh, OPEC surplus and they, and they say it’s, you know, I guess it’s a Spec to, to be a 1.2, something like that. Um, uh, their co the capacity and, and um, and then they’ll, they’ll always say, but high inventories offset that. So, so, so basically on the OPEC surplus would look tight if it wasn’t for, um, the, the support, uh, excess, uh, inventories that you just talked about.
Speaker 2: (11:36)
Right. And the thing, if you look at the market structure, the front months still are in pretty good. Contango you know, Debbie and good isn’t good. Contango Brent, this is getting a little bit tighter, um, because they’re starting to, Asian demand is as picked up for, for forties, uh, as a result of some of the Persian Gulf cutbacks. Uh, but if you still in contact, you know, the fronts are stolen
Speaker 1: (12:03)
heavy contango well I’m just going to throw econ 101 at you, but if you have a large amount of financial buyers of futures contracts and they have no interest in taking oil and you know, they just continued to roll over length, right? Um, that basically the idea is they pushed demand up the price, they pushed the price up because they’re, you know, their net, let’s say they’re all on one side, your net buyers. And uh, when they go to a role, they’re always pushing the front month down and buying it back on. So they’re basically, yeah, we want to buy oil, but we as we get close to a delivery, no, we don’t want it. So, so that action, if you push prices up artificially, you bring out more supply. You dampen demand at different, basically has to be storage. So we may see in financial, as, you know, we were, we were used to talk about this and the 90s how much funds and financial guys are influencing the markets in and there, you know, there, there are multiple of that now. So, so they’re really a big influence and, and um, you know, it’s hard to pin down exactly how much, uh, it, it’s one factor basically and we don’t know how much to weight that factor, but these guys can have an influence on that contango going forward.
Speaker 2: (13:30)
No question. And it’s interesting the, uh, the net length of, um, for Wti of the fee of the money managers or the non commercials is, uh, is six to one long, right. I mean, it’s really long. I don’t think, I’m not sure if it’s as long as it’s ever been, but six to one long is, is, you know.
Speaker 1: (13:54)
Yes, yes. I find it interesting that if you, if you think that a lot of a lot of this money is, um, is, is computer generated signals. So trend following stuff, um, you know, if the market goes up and then more money comes in, if it breaks through resistance, more money comes in and that kind of thing. But when you look at the u s oil that the ETF, that’s actually a, it is, it’s, it’s a fun that just basically buys futures contracts. It’s a long only thing. Um, the money seems to go in and out, uh, more as a value trader. You know, it was like when the, when the, when the oil prices come down, more money goes in and when prices go up, more money, it comes out of, you know, I haven’t studied it, uh, you know, done regressions or anything like that, but it just seems to be a different kind of player in that market.
Speaker 1: (14:48)
But that’s, that’s just an aside. Okay. Can you, can you talk about when we, we’ve covered this already, but, um, the, the, again, back to the EIA monthly, they came out, uh, they’re showing stock levels for 2017, uh, you know, petroleum liquids going up 0.3 for the year and then they have it up 0.1 for 2018. Well, it’s too far, but are we ever going to be, I do have a draw. Uh, I think 0.1, the second half of 16, but are we ever going to 17? I 17. I, I keep, I haven’t checked that new year off in my head, but are we ever going to get, uh, you know, a good, a good draw. I mean, what’s your feeling on these
Speaker 2: (15:38)
seemingly, because can’t seem to get out of our, our way. And I, you know, the last, the last week we, we were on our way actually to drawing some, some inventory. Uh, since July we had, we had drawn a 55 million and then all of a sudden the last two weeks, total stocks built by 20 million led by, uh, led by gasoline and distillate. So it’s going to be, you know, part of it we’re going to have to start losing, losing some of the contango. I think one of the good part of the total stock draws that we’ve seen have been in, um, you know, in, in terms of, uh, liquid exports, propane, certainly, uh, those exports have been strong. Gasoline has been really strong. Uh, diesel too. And then crude exports are our record. So, um, you know, I think it’s going to have to be the export market. They’re really, they’re really starts drawing the drawing. The inventory’s down or we start calling into series. You know, if you go into big backwardation, um, you know, maybe we’ll, we’ll get, um, some inventory draw on the market is indicating that, you know, along down to 17 or 18, uh, crude could crude could go, a crude could go or dated.
Speaker 1: (17:01)
Interesting. I, uh, the Atlanta fed GDP now has a growth in the u s plus 2.9%, which is a pretty good number compared to what we’d been growing at. And then I think also a lot of the, uh, world, uh, PMI type stuff, uh, numbers are coming in, uh, better. So it’s, it, you know, it’s possible that, uh, maybe we get a little, uh, you know, bump up this year in, in world economic activity, which would certainly help and help. Yeah. And it might explain some of these, a brisk, the brisk export markets that the US is seeing right now.
Speaker 2: (17:43)
Yeah. Jemez as I think you pointed out, the, in the, um, monthly, um, they said the, um, ethane demand is going to be very strong this year because of some of the new petrochemical plants along the Gulf coast this year and next year. Um, so that, that’s going to be, um, you know, that that’ll be, that’ll be something that has to be carefully watched. Uh, but in terms of gasoline demand and diesel demand, you know, I think gasoline demand this year in the u s is going to be flat, maybe, maybe a little bit higher beings. Pump prices are going to be well above last year’s numbers. The fleet is, is, um, fleet efficiencies. We’re losing some gains on, uh, on fleet efficiencies. Um, but I, I think we’re going to see a, a price effect on the, uh, on pump given where the pump prices are going to be. Um, so I, I, I don’t see gains and gasoline and diesel, we probably will see some gains because my name manufacturing is going to be stronger. Um, and it’s not going to be as warm as it as it was last last winter. Although January’s now looking like it’s going to be warmer than normal.
Speaker 1: (18:55)
Right. Okay. Um, let’s, can we just talk about the a week, there’s some really interesting things coming out of the weekly and I just want, I want you to take them, uh, maybe one by one and give me your comments on them. And this is the, a weekly Eia reports we had record runs. Where do you think about that?
Speaker 2: (19:17)
Yeah, the, that’s, that could be just noise. I, I, a lot of these numbers, it’s your brand. Um, you know, margins, it’s noise for margins were, were really strong in the last two weeks of December. So obviously refiners are reacting to the, uh, to the strong margins. That’s 17 one is going to go down because
Speaker 1: (19:41)
when is, when did they start turning, going into turns gone, right. I this, first of all, they’ve been, um, since that report, they’ve already been two or three major refiners
Speaker 2: (19:50)
issues. Uh, and as we head into this is the second week, so the fourth, fourth week of January and on into February, we’ll, you know, turnarounds, I don’t think it’ll be as big as last year, but that run number’s gone down. Um, you know, that’ll probably be a high watermark for a long time. That seven.
Speaker 1: (20:11)
Right, right. Very good. Um, the also the demand for gasoline and distillate, it’s just kind of fell off the table.
Speaker 2: (20:20)
That’s your answer. That’s just the mice. You’re a noise. Yeah. There’s no way that that uh, to slit the man was like 2.9 3.2 the last two weeks. It’s just not way. I mean, that’s so off trend. And then what will happen there is one of these weeks, um, diesel demand is going to end up being like over 5 million a day. We’ll try and catch up, catch up.
Speaker 1: (20:48)
Okay. And then, uh, we, we talked about oil exports. Um, you know, that’s just something they’re booming.
Speaker 2: (20:57)
Well, they’re blooming, right? Mexico, um, is, is taking a tremendous amount of, uh, of gasoline, uh, because their refinery capacity is only fifth is running at only 52%. The demand for a gas us gasoline is just booming. Right? Mexico. And um, and then again, they are, and I know we’re going to discuss this more in detail shortly, but it, our two biggest trading partners are Canada and Mexico. We’ll see. What, if there’s any change to either, you know, the North American free trade agreement or to the border adjustment tax. You know, there could be, there could be these flaws could raise all hell, could break loose on these funds, some of these, some of these flows, right? You want to build the pipeline, but then you want to, you want a tax that stuff coming through. Yeah, it’ll be interesting. It’ll be interesting
Speaker 1: (21:59)
forward and, um, that will have an impact on the, on the spreads. Um, so, okay. So I want to take it to the options world because I find, I think there’s some really interesting things going on that kind of a compliment. Some of the stuff we’ve been talking about. And, um, first I want, I just, I just want to recap quickly what happened last year. So, um, you know, we, we came into the year, uh, in, in February, we made that high of a volatility of 79.2 a that’s fed 12. And that happened to be the third highest spike of volatility of all time. So the, for the highest was the Gulf War One and the second highest was a 2008 in December when we dropped to 34 and 35 bucks from one 45. Um, but the low was 27 three and that was coming out. So it was 1228.
Speaker 1: (23:01)
So the end of the year post OPEC, uh, we reached the low of the years. So a very interesting, the other thing was, um, we set a record volume number 460,000 options, uh, traded on November 29th. And then the next day we broke the record again. 579, nine 35. And as you know, Andy, the, uh, day one trading where November 14th, 1986 we were, we were there. You were there a father around 5,000 trade. It’s so, so this is a, uh, you know, my head, my baby’s all grown up. Um, and again, the, the, if you think about putting a perspective, the longterm average was 33.2 and for the year we average 42.0. So, so if you thought it was a volatile year, you were right. And, um, again, we’re, we came into this year, uh, 27 three and we’re, we’re just, uh, we’re, we’re in a 30, low thirties right now, which is the longterm average, right?
Speaker 1: (24:03)
Well, yeah, we’re right, right, right. Just below the long term average. So, um, you know, I think the Eia mentioned BIA always does the 95% confidence interval for their price forecasts. And they come up with, you know, a year out, it’s a, you know, something like 30 to 90, um, and this, and they did it this time when it’s, it’s a very, it’s a relatively low volatile years. So even these low volume, low vol expectations still indicate wide price ranges as you go out. So, um, but what I wanted to talk about, uh, is, is where is all the activity in, in the options world. And it’s basically, if you look at, uh, the front month, let’s say February, you see all the open interest showing up on the 50 and $55 calls and the, uh, the 50 and the $45 puts. So this is, you know, we’ve, we’ve been moving around a lot, so you can, you can see that, I mean we’re, we, we kind of have this, um, this a range expected and the $45 put a buyers are probably thinking along the lines that you were saying maybe little a weakness early on, uh, in the first, uh, first quarter.
Speaker 1: (25:20)
And then as you go through the year, it’s the 55 and $60 call and the 45 and 50 puts. So these are, you know, if you’re a producer, you’re probably saying let’s, let’s sell $60 calls out and buy $50, puts $45 puts, and that’s probably a range they can, uh, they can do some serious, uh, oil producing in, you know, that that’s a good, it’s a good, uh, coverage for them. And then if the market blows up at 60, um, there’s some crude at $60, but, but the next, uh, round of hedging they’ll get, they’ll get a higher price. So, so that’s $60 call makes selling mix a lot of sense for producers. So when you get to December of 2017, um, the open interest on the 60 call is 43,000, and that happens to be the number one option. Uh, in terms of open interest.
Speaker 1: (26:16)
Now the December options have been around a long time, so it’s catching, you know, it’s, it’s got a lot of time to accumulate a that number, but oftentimes it’s the front month that has the most open interest and uh, you know, a deferred month like this. So again, there’s probably some calls selling by producers, but the $60 call December as has probably got a lot of, um, a lot of bullish, both speculators that as well. Uh, if we look at the spread options, so this would be the first, first month, second month spread, the open interest going out 2017 seems to be accumulating on the flat call a, which was basically, you know, you, you buy that. If you think you’re going into backwardation and you sell it. If you say, no, we’re not going into backwardation and the minus 50 put is very active in. And if you think about if you own a storage facility, it’s probably getting profitable right around that minus 50, uh, price.
Speaker 1: (27:22)
And if you collect the premium, um, it’s a, it’s a nice hedge for your, a storage facility. So often we see, um, uh, owners of storage, uh, selling that put as as a hedge. So those are those. So there was nothing strange there. Uh, I’d say that the craziest thing that we’ve seen as you and I have talked about are these, uh, Brent Ti options, the apprentice spread options. Um, we’re, we’re seeing a huge amount of open interest accumulate on three strikes in December, 2018 the flat call has 48,800 open interest and the plus $2 call has 13,000 oak interest in, in June 18. The flat call has almost 14,000. Now compare that to, if you take every other Brent ti I option a, the highest open interest is, is around 3000. So this is a huge, uh, amount of open interest on these options. So maybe you could, could you have legislators are up digital for once because some of our listeners may not know what, um, that spread option really means.
Speaker 1: (28:43)
Like what does the flat call yes. So I’ll call. So if you could explain to them, you know, what the, what exactly what that is. Yes. A flat call would be, uh, uh, it w it would mean that Brent is that the same price as Wti? So if I bought the call, it’s just like any other call, but that position would make money if WTI increased its value over Brent. So they took the price of Wti, subtract Brent. It’s a positive number. So let’s say it goes a dollar over, that flat call would be worth a dollar and expiration. Okay. So he, so when I say there’s 48,000 contracts on that and means somebody, somebody who’s been buying those, uh, and it’s settled at a price of a dollar 61, they probably bought them cheaper than that. Well, I think they started buying them when they were like 20 cents. Yeah. Yeah. It’s like yesterday’s, yesterday’s activity on this was, I think there was about 4,000 lots on, on these three options and open interest went down. So you could see there’s, there’s some profit taking going on, I assume. But, um, why don’t you, I mean, we’ve talked about this. Why don’t you talk about what, what you think that buyer of this is trying to, uh, uh, get, uh, get out of this trade.
Speaker 2: (30:03)
The, um, I think the impetus for this trade is on a change in tax regime, uh, specifically a border adjustment tax, uh, whereby, uh, whereby imports of crude would be taxed by a certain percentage while export us exports will not be taxed, which would presuppose if you did the a, if you did all the modeling and many, many of the investment bankers have, have put out reports on, on the, uh, on the modeling. But it, it, it would, uh, suppose that that Tei would trade at a significant premium based on, uh, whatever the, you know, she just wanted a model and on what, on what the taxes, uh, with some, um, you know, some reports saying it could be as high as five, six, $7 over. Uh, so buyer of this Wa is, is obviously either a, trying to hedge it a big exposure or just taking a, a speculative view based on the, based on the tax of course, you know, there’s a long way to go between now and, uh, and when this would be enacted.
Speaker 2: (31:17)
But, um, and there are many factors to a brand Tki, uh, besides just taxes would be, but, um, you know, it could be a significant change as good, any change in Nafta. So, but that, that’s the, that’s the driving force I think behind this trade. And then once the, um, the trade was done in big size, so everybody’s talked about it, analyze it, studied it. And as so often happens and happens in markets, you know, it’s now become the, the trade does yours. Jim just mentioned giving all the, given all the open interest that, that, that’s built on these, on these, uh, on these trades. Um, oh, also the underlying, the December 18 Brent Tai has rallied from WTI minus $2 when they first started putting this trade on, Tai was $2 under breadth. So they had, they had $2 to go just on the underlying, uh, to get to flat. But now it’s flat, you know, so the underlying has worked. Um,
Speaker 1: (32:24)
yeah, it’s a big problem for, uh, people who like if you, if you’re a market maker, you sold those options and what you do is you dealt the hedge it and you know, to, to, to some of the liquid to Delta hedge, something like that that’s just moved. It’s, it’s very difficult. And um, uh, I, I hope the, uh, the seller has a, you know, you hope it’s some sort of, um, I don’t know. Some, some, somebody with deep pockets that they can, I don’t know. It’s a very, very difficult thing to, uh, uh, to, to manage the risk. I mean, we, we, we’ve, uh, we’ve seen this with the, um, when you think about the calls that get sold on the, um, uh, March, April and natural gas a few years ago where we had a cold snap and, and, um, you know, the, they’re just still w when you’re trying to get out or you’re trying to cover it with, with the underlying futures. Um, it’s just, just impossible. So, um, we’ll, we’ll be, um, I would that kind of open interest. We expect this thing to be, you know, focused on a lot and, and, um, I’m sure the oil, oil guys are all experts on tax policy and macro implications for what it does to the dollar and all that kind of stuff. Now.
Speaker 2: (33:44)
They still, they are now, I think one of the main state, one of the main things at this trade has, uh, brought to brought some main focus is the border adjustment tax. Right. You know, that’s good to get past the, uh, the oil industry. I’m sure it will be lobbying, uh, one way or the other.
Speaker 1: (34:04)
It’s a fear if you’re integrated, right. If you’re a degraded, yeah, it’s a, it’s uh, it’ll be interesting to, to watching it. Then there’s also the, um, you know, of any pipelines get built. We’ve got that. If say something like the keystone pipeline against bill that’s more oil into cushioning and yeah, it was just, how would you, would you trade a Brent? I mean, I, I’m a spread option out in 2018 based on a pipeline into the, from Canada into the u s being built. I think it would be hard to take either side of that. Just so much that that’s why I’m, I’m just surprised at the size. However, if they’re taking profits now, they did enough size to, there’s, there’s, there’s enough uncertainty in this thing to get that Brent Aci, you know, moving up and, and you know, then, then the person who’s short all those calls has to buy even more to cover it. It creates its own dynamic. So, um, anyway, anything else you want to add to a today so we can cover? There’s a lot of moving parts, you know, it’s just, uh, it’s what we love about the oil markets. There’s always something going on. But is there anything that you want to cover that we may have missed it?
Speaker 2: (35:21)
I think we, we covered a lot today and then I think we’ve, you know, this is going to be a lot of uncertainty in 2017 so it should be, it should be a pretty good trading year, I think. And I think there’s going to be a lot of, a lot of opportunities, but we certainly don’t have it anywhere
Speaker 1: (35:38)
near the information that we need to try that out. That’s probably a good, you know, that’ll be good for markets, right? I mean, that’s the speculators advantages. If you don’t like the market, you don’t have to put a position out. But when you’re, when you’re hedging or, you know, when you’re in this stuff on a daily basis, you know, by not doing something, you had been given a position just by the nature of the business you’re in. So, you know, so it’s a really, uh, you know, a hats off to these, uh, heads hedgers that have to make decisions on a daily basis and, um, uh, with, with, uh, in a market that seems very, uh, where there’s so many factors, but that’s why we, uh, are drawn to this stuff. Okay. This is Jim Colburn and Andy Lebow commodity research group.com. Check us out on our website and also, again, I’d like to thank Doug Stetzer, EKT interactive oil and gas training, and you can check out Doug and what he’s doing firstname.lastname@example.org. Thank you very much.