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, oil market experts Andrew Lebow and Jim Colburn discuss key fundamental forces driving oil prices in both the futures and options markets.
About Your Hosts
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.
Good afternoon. This is Jim Colburn of commodity research group. I’m here with Andy Lebow also of commodity research group and we’re here with another edition of energy markets. To find out more about us, check out our website, commodity research group.com where we post our blog and our podcast. We would like to thank our friend Doug Stetzer of EKT interactive oil and gas training for hosting this podcast. You can check out his podcast and learning email@example.com this podcast should be construed as market commentary, merely observing economic, political and market conditions, and is not intended to refer or endorse any particular trading system, strategy or recommendation. We are not responsible for trading decisions taken by anyone, especially those not intended to listen. Information is not guaranteed to be accurate. This is not an offer to buy or sell any derivative. The primary purpose of this podcast is to educate and inform and I guess maybe to get you to hire us as consultants. Today is June 12th Andy Lebow sort of call Barb. How are you? I’m doing good. How about you? Very good, thank you. I thought we’d jump right into this. Uh, we have an OPEC meeting June 22nd. And, um, you know, we talked about this during the week and, and I think you, uh, you mentioned that, uh, OPEC is giving us guidance and I feel like it’s the Fed meeting, but why don’t you tell us what’s been going on, what they’ve been saying and maybe what you’re looking for out of this meeting?
Well, yet another OPEC meeting in our a long end, uh, mostly, uh, I guess sometimes illustrious, mostly illustrious career. Thank you for helping me out there to, um, I think what you said is right. I mean they, they really, over the last year and a half since the November meeting have been very good about telling the markets about basically giving it, giving guidance, telling the markets where it’s, uh, where it’s production is going to be. And uh, you know, what, what they’ve been thinking about. Of course they’re a subject to, to change that, to change. But this OPEC meeting I think is, uh, the kid say it’s completely well, well forecasted by OPEC, but they definitely have talked about increasing production by the, and the, the number they floated has been, uh, a million barrels a day. They’ve talked about gradually increasing production and that’s between both OPEC and a non OPEC producers.
What I think’s going to happen at this meeting, I that uh, they are going to increase production. I think it’s going to be 0.5 to 0.7 million barrels a day, uh, before the end of the year. And then another, a 0.5 to maybe 0.6 million barrels a day, uh, in the first half of 2019 for a total increase of 1.0 to a 1.2 million barrels a day. Something, something like that. That’s not a net increase. And we’ll talk about that. Jim, I’m sure from a, from OPEC and non OPEC, but I think that that’s the numbers, uh, that that will be low
looking at, well I want to, um, the EIA monthly, a short term energy outlook was out today. And uh, I pulled off a comment they made, and this is pretty obvious, but they’re saying the magnitude of supply response is uncertain. And, um,
why don’t you take that, I’ll pass it over to you a comment from, uh, from our government, but I think that that is a, yeah, I think that’s probably correct because we don’t know, you know, maybe they’ll come up with the full million by the end of the year, although I doubt it. Uh, we don’t know how quickly the barrels are going to come out. You know, most importantly, a one OPEC producer, Venezuela is going in the opposite direction actually to OPEC producers are potentially going in the opposite direction, Venezuela and Iran. So we really don’t know the magnitude because we’re seeing a, we probably will see an increase from Saudi Arabia, the UAE and Kuwait, and a decrease from Iran. And Venezuela, both of them very, very unknown as to where their numbers are going to, uh, to fall out.
He didn’t mention that other new OPEC member, Russia,
Russia. Well Russia is it going it right rushes on the, on the uh, non OPEC side. Russia is going to quickly increase production. Probably the, they’re already on the way up. They’ll probably have production up two to 300 by the end of the year I would suspect and maybe another hundred in the first quarter or second quarter of next year. So in terms of the other non OPEC producers that are party to the steel, um, it really does it look like this all that much, uh, additional barrels that are going to be able to come out from the um, from the other OPEC uh, other non OPEC producers. The um, you look at Mexico is actually there. Their target, it was 2.3 million barrels a day. They’re producing to one and at best, you know, two one five maybe and a Azerbaijan, Oman and Kazakhstan may be a little bit more. So Russia is going to carry the lion’s share of the non OPEC production increase that are party to the deal, doesn’t include us and Canada. Obviously.
I wonder if you could, uh, just a step back and summarize what’s been going on with the analysis of a rant. I mean, we’ve heard numbers from zero to a million off the market and I think, um, last time, uh, they had sanctions put on them. It was a 1.2 million off the market. Um, what, what are you hearing and what, what kind of number are you working with?
Well, I think the zero to 1 million barrel a day is a pretty good rates. That’s probably right. We really don’t know the outsides. I really don’t see a zero, a zero or a million. 1 million has an outside shot. We’re, we’re working with a or a right in the middle, but it could be much more, could be much less depending on where the waivers come out. Uh, right now we’re in the hundred and 80 day wind down period and there are indications that some companies are, are decreasing. They’re purchasing from, from Iran. You know, there are issues on sanctions with banking, with shipping, with, with insurance. So, um, you know, some companies just are not going to, are simply not going to buy from Iran. And of course the whole where the EU is going to come out with, with the entire deal is another issue where China’s, where India is a lot’s going to depend on a GL, GL, political developments obviously, uh, with, with the u s so in terms of, you know, where, where waivers come out, you know, that’s very uncertain. So, you know, the lists that I’ve gone through, we’ve gone through each, each country and for 50 cents number I come up with the, I have to tell you, I star just about every single, uh, just about every single buyer, Jen, in terms of, you know, maybe yes, maybe no. And it will be interesting to see where, uh, we’re OPEC is going to come out on, uh, you know, cause this is key for the balances obviously on what they think.
Well, the Russian Oil Minister Novak, I think what was a intimating that he thought 10% of production would be curtailed a, so that’s 3.8 barrels a day. So that’s 380 that uh, he’s using. But um, he probably has some better information than we do gym. Of course. He probably doesn’t really know either.
Right. Venezuela for a second. I OPEC OPEC monthly report also allowed today has Venezuela from secondary sources producing 1.392 and it gets down about 42,000 from last month. There is a, if you try, if you charted this, it’s, you’d still be bearish on that number. I mean, where’s the bottom?
That’s a good question. I don’t think, you know, we, I think Jim it when, uh, we used to call those what, when the chart looked like that, you know, we call it the cliff formation, right? I think that the, their production is basically the cliff formation there. They’re down, you know, from their target. They’re down 650,000 barrels a day. And I don’t think, it doesn’t really look like the bottom, the IEA said, you know, by the end of the year and their last report, there may report, they said by the end of the year they thought Venezuelan production could be down on several hundred thousand barrels a day more from a, like a 1.4 number. And I think that’s right. I mean there’s no indication that, uh, that things are turning around. So clearly it’s got to be a big, you know, big input into this next OPEC meeting. Uh, in terms of where they, where they see Venezuela and certainly where they see Iran.
Several hundred thousand means, uh, more than three, less than 10 maybe.
Yeah. Cause it, yeah, I think it’s, you know, two to four, three, I, you know, it’s several hundred thousand barrels a day more. And, uh, you know, they’re, they’re having their assets were, uh, just sees by Conoco Phillips. Uh, they’re, they’re asking for shift to shift transfers of the crude. They’ve got a lines of tankers backed up cause they can’t get it out. Uh, their workers are leaving, you know, that they’re leaving their jobs. There’s rampant corruption. So this is nothing, you know, there’s nothing indicating that this is going to find the bottom and all of a sudden, you know, Venezuela and production’s going to start rising. It just isn’t
right. And, um, let’s move over to the US response to all this. Uh, you know, again, um, the EIAs numbers came out today and they didn’t change. It doesn’t look like they revised production at all. I’m still has that sharp upward. Uh, it looks like 1,000,004 increase, um, this year, over last year and maybe another million next year. You want to, you okay with those numbers?
Yeah, I, um, you know, we, we, I am okay with those numbers. I think there, um, you know, I think they’re probably close to right. I mean one one thing, even though they’ve the Eia, I can’t, you know, they do have, we went to a presentation at Columbia, uh, with one of the AIA analysts and I think both of us were so impressed by the models that they, that they put together. You know, I think they really do, they really do an excellent job. It’s hard to forecast production. They’ve certainly been inaccurate. The, they’ve been accurate from time to time over the years. But, um, yeah, I think those numbers are pretty good.
I mean, the weeklies, we’re, we’re um, I think a little bit below last October, I think they were both a little bit below the monthly updates. But, um, when you look long term, they are under it over. They do, they track pretty, pretty darn good. Sometimes I might get a little myopic, uh, you know, getting too close to the weekly numbers, but see, they, they really do get it right. They do a very good job with those things. But I guess the other piece of that is, uh, it’s one thing to produce it. It’s another to get it to market. Right, right.
So, and that’s a, uh, you know, I think that’s been a, a real feature during May and June of the, um, you know, of, of the market. You look at these discounts, uh, Midland and may God is the guy like 15 on Wti. Uh, right now it’s uh, eight or they, it’s eight or nine under Wti and uh, but Euston is eight over Wti. The Houston market is eight over. So you know, the puts Midland at 16 under Oh, to get it out,
right? Yeah. It was looking at, uh, the Brenty I spread and um, actually the, uh, the EIA this month, um, you know, they, they lowered their price on the Brent ti I spread and a, I was just wondering if you, if you thought the Saudis Console, uh, uh, Russia with, with the idea that hey, at least take a look at the Brent Ti, I sped there may be producing more. They can’t, they can’t get the good price. Right.
You know, it’s interesting. If you look at the bread Tei, that’s, you know, that’s obviously, and we’ve talked about this, so that’s been mentioned in the press. You know, that’s Cushing, Oklahoma, midcon and you know, to North Sea Bfo, he, uh, Brad 40 Salzburg and echo Fisk and the North Sea, uh, um, you know, you really have look at where the ports are trading. Like LLS is $8 all over. So, you know, and you know, as I mentioned, the Houston market for sweet crude is $88 a over. So you know, that 10 or $11, it’s really, you know, from the port is two or $3 a it shouldn’t, you know, so, so exports I think of still be strong. Uh, but you know, it’s, it’s not as, um, it’s not as huge as what is what it looks like on the screen.
Right, right. Cause it’s a right, cause you were looking at the Cushing, Oklahoma. Exactly. Um, I have to say along along those lines, uh, you know, in, in my world of options, we have seen some activity in that Brent [inaudible] spread options. And, um, particularly in the, um, you know, you, if you, uh, they basically been following the market down. So you see in the, on the put side, uh, in December the minus three, four, five, six, eight and 10. I don’t know why they skipped the seven, but you’ve seen those puts a trading and I’m not sure. I don’t, I don’t see that flow. I’m not sure who’s initiating. Uh, but they, those are active and that, that makes a lot of sense. But I don’t, I just, uh, want to throw an option comment in here because, uh, we are 10 days away from this OPEC meeting and we did see a bounce and volatility up to about 26% on the price move down.
But now we’re back to around 24%. That’s, that’s July and August the July option expires 15th of June, so it’s gone, uh, before the OPEC meeting. Um, but you’re not seeing it. It’s exactly the same as August. So, so maybe, you know, oftentimes you see a premium and the front end. So maybe the fact that there’s no premium there, it means that we’re starting to see, uh, people put positions on for the OPEC meeting in August, not July, or at least buying options in August and not buying them in July. Um, and also it’s, it’s the, the long term average is 33. So with all that uncertainty that you mentioned, I guess some of it’s offsetting or, or the, the market is not looking for a big collapse in price. So my point is there’s, the fear factor is not in there and this is market it at all.
Uh, it’s, it’s way below average as we go into this OPEC meeting and it’s tracking the, um, the historicals and around 23%. So, you know, it’s, it’s, uh, they’re measuring different things, historical or, or what people call realized, uh, is looking backwards and implied. So looking forward, um, it’s kind of, you wouldn’t, you wouldn’t know there was an OPEC meeting coming up is what I’m trying to say, but it is 10 days. We’ll see, uh, if something happens is as we go forward, but I want to move into a EIA. Had some interesting charts today and, uh, you know, the, the oil markets like to compare things to the a five year averages. And if you looked at the, if you look at what they’re projecting for the rest of the year in until late into 2019, it looks like a crude oil, uh, is, uh, stocks are in the middle of the five year for, for the u s or in the middle of the five year average and they’re going to move up. They expect them to move up to the top end and right and distal it’s stay right at the bottom of the five year average. And gasoline stays right at the top of the five year average. So why don’t we, why don’t we, uh, why don’t you pick what you want to talk about it and gasoline distillates or a US crude oil stocks. And uh, let’s, let’s get into these, uh, these three relative to each other.
Well, it’s interesting you mentioned that because, uh, I was, I was looking at the same thing and the EIA is looking for some serious builds coming up. At first, we’re going to first we are, we will draw stocks over the next few months. Both the EIA and the EIA says we’ll trust stocks. I think we’ll civil, we’ll see a pretty healthy stock drawer. Refiners are really, uh, not been able to maximize crude runs owing to a lot of issues that they’ve had coming back from turnarounds. Production. Yeah, just, um, operational problems. So, um, I right now, uh, crude stocks are at a 437 million barrels, something like that. And Eia has some going down to a four 14 in August. Um, so a, a draw of another, uh, 20. I think it’s going to be something like that, maybe a little bit more, which should be, um, you know, I think that’s going to be constructive.
Uh, certainly for, uh, for Wti. Then they have from there on out, they have some [inaudible], some big bills. I mean that they have the market building up to 480 or crude building up to like 480 million barrels by next May. So a, you know, a serious built and total stocks to buy next June. They’re saying total stocks are going to build a hundred million barrels, which are, which clearly, you know, it gets us to 1.3 billion, which is, you know, that’s on the surplus side, then you’re looking at 63, 64 days supply versus, um, you know, currently we’re at 60, so, you know, that’s, that’s uh, it’s curious to me, they may not be the stocks then. They’re usually not that great on, but you know, that’s pretty interesting. And, and you know, it could be, certainly could be bearish for, uh, for structure later on because, uh, first I say structure may tighten up.
Well, let’s, let’s look at today’s OPEC numbers. Um, they, they’re looking for a call on OPEC of 30, 33.3 named bowels in the second half of 2018 and that’s against a 31, eight, seven current production. So, right. So even if OPEC and Russia were net were able to raise production, um, it’s still might come up a little short.
Yeah. As, as I think you were saying earlier, if you to look, I looked at that call on OPEC from the, from OPEC, you know, you’d be buying if you buy in the market left and right, no matter what OPEC does, there’s, there’s going to be a short fall.
And I, I think that’s been a consistency yet. I mean, OPEC was looking when they come out with their monthly report, look, the most bullish IEA also showed I think sharp draws and the fourth going into the fourth quarter and the, the u s the Eia was, was less a bullish. And, um, I, if I have to say the, the, um, most, uh, the options with the most open interest are a lot of these, uh, is the, the December 80 call, which we saw a flurry a few months ago after one of these reports came out, uh, of call buying and, and obviously selling. Um, and the, and if you look at like the top 10, they’re mostly D’s calls and s and set calls with the most open interest. And I, I find that, uh, interesting. And, um, what do you think about the, the top open interest option, the DCE 80 call you think that goes in the money or out of the money? Just throw that out there.
What’s your 80 for Wti by, I’m actually off like the third week in November. So yes. Yes. That’s going to be a really hard stretch I think. Right. I think that I would say that that’s going to expire out of the money. You can’t say I, you know, I think Wti is a chance to get back into the 70s. Uh, 80 could be a really, uh, could be a tough stretch cause by, by fourth quarter there are going to be there, there will certainly be more barrels going coming onto the market. Also, the EIA has us for eduction off by half a million barrels a day by average in the fourth quarter from where we are right now. So you know that that too may may serve to keep the market in check. Uh, like you said, Jim, I, it’s hard to see unless it’s a, it’s hard to see the market having a broad base sell off. Just of course we just came off. Right, right, right. Oh, it just came off pretty hard. Yes.
But that was at Boston million barrel increased number right from, okay. We also, we also have seen a funds liquidate a lot.
Oh goodness. Where we’ve seen, I think between Brent and WTI funds liquidate like 250, 300,000 net length of a few weeks. And that was bound to happen. I think those two were working in concert, you know, to, to take the market off. Uh, um,
I just, uh, just uh, quickly, uh, we had two weeks ago we did a, uh, a special podcast with Andy affirmative risk revenue who deals with hedgers and um, his, he felt that he said his particular client base was hedged more than the industry average. And one of the reasons he gave was because of the, uh, record amounts of speculative activity on the long side. And, um, I said that was interesting because, you know, if you, if you get some news that’s a little bear, I mean million barrels is, is more than a little bearish. Um, and you get it, you get it rolling on the downside, then all these folks come in and liquidate and it makes it maybe more of an extreme move then then you might expect, I think we saw that and I think we saw that. Yeah, but you can you make a case, some just want to throw this at you.
The, um, if you look at the, the open interest on the put side, the biggest one is the 50 put and I’m guessing some of these, um, set 55 set fifties, these forties, these 35, those are the top open interest. It tells you that there’s, there’s just not a lot of a short term position trading in options. I’m not saying there’s none, I’m just saying it’s not extreme. And also, uh, these, these may have been put on a while ago when we were at, you know, maybe six months ago, maybe last year. Um, so they’ve been on, some of these have been on for a while, but can you make a case for a $50 oil and December?
Similarly that would be, that would be tough to do. Of course, as we both know, Jim, anything is possible in these markets. Right. We seen, you know, over our careers, we’ve seen some moves that we didn’t think was, it was, uh, was possible. So always, certainly, you know, there’s, if this a, if there’s some kind of event, you know, that that causes some deep demand destruction, you know. Yeah. I guess we, I guess we can get down to a, we can get down to $50 on the supply side. You know, we’ll probably take Saudi saying that they were going to just, you know, search up the capacity and I that suck. You don’t see that because that’s where all the spare capacity is. So um, you know that up from a supply side it would be tough. It would have to be, I think it would have to be a demand side, you know, some kind of demand side event.
Yeah. I think the, again, the numbers like that, I think they’re looking for 1.8 million barrel crease. A lot of that’s um, what NGL type stuff on demand demand liquids. Um, and another 1.7 and 2019. And then, um, you know, one thing that you start pretty high, don’t you think? Yeah, it’s high a opex a little bit below that, but it’s a, uh, that, yeah, I mean it’s again, I mean I, Eia has a gasoline demand flat so, so, so, you know, um, but the um, the economies, I mean Atlanta, I see this in the, in the, in the financial news that the Atlanta Fed is plus 4.6 and then there’s this, is there a GDP now cast? So it takes, it’s just a, I don’t think there’s any opinion in that. I think it’s pure a data driven model for Q two in New York fed has a plus 3.08 for Q and plus 2.89 for key three.
And, uh, I admire their sense of humor by using decimal points, but, um, in their, in their projections, especially going out to the hundreds, you know, it, uh, but, but the point is these are, these are pretty good numbers and I think the OPEC is used, I think they use IMF estimates for world growth. It looks like a 3.8%. Uh, they’re using this year. So, so, uh, as far as like economic activity, it just doesn’t listen. Like you said, this thing could change. But um, for now it looks like this market stays supported at some level.
Yeah. I, I think so. You know, the, the, it’s, it’s yes, as well as I was saying, it’s hard to trace a $50. Could there be a fuck 55 handle? Yeah, sure. That’s possible. Could there be a four handle a man? Yeah. I just, things are really have to start unraveling and the in a hurry. Yeah. Again, that would, that may be an, uh, an event, you know, some kind of an event driven thing.
Yeah. So, um, you know, getting back to the EIA forecast, they, uh, they take the implied volatility from options and, and they impute a, an expected trading range and they, um, they get it to a 95% confidence interval. I think you should strike out the confidence that word, but they come up with $52 on the, on the downside 81 on the upside. And then I did a very, very rough estimate. I’m not going to go through all the calculations, but it was very simple. I came out with December a 95 into rural would be something like a 44, 75 to 93, 75. So, so this is where the, you know, again, we’re working, these things work off a normal distribution and we know that none of these commodity markets are norm act normally there. There, there is there abnormal. But, um, that’s, that’s a very wide range of possibilities that’s built into this relatively low implied volatility, um, options market.
Um, okay. Uh, so let’s talk about, uh, let’s get back into prices. Um, w we have seen a correction in the market that put you on the spot. Where do we go from here? And the crude oil, crude oil I think Wti us a chance to uh, to appreciate a little bit more here. Uh, as I was saying, I think inventories are gonna are gonna draw, um, you know, pretty smartly over the, over the next um, four to eight to 12 weeks perhaps as, as refiners. Um, increase, increase runs. I think x force will be running, you know, pretty strong, well over 2 million barrels a day. The balances look like that look like they’re going to draw in the short term and that, and that should be supportive. Of course, you know, we are going to have, we’ll see what OPEC, you know, w what they come up with and you know, we’re going to have to project, you know, what those, cause the third quarter is going to, stocks are going to draw because it’s gonna be hard for them to immediately increased production.
But of course the market is going to also work towards discounting. You know what the what the increases, you know, whether it’s any I only 1 billion and I live gotta take away the Venezuelan, you know, take away where Venezuela is going to be, which it doesn’t know and Iran is going to really shake out into next year. But you know, it short, shorter term. I think the market looks, you know, I think it looks okay. You know, I think it can get back to 70. I think Brent Brent can get back to 80 but it’s sort of a tricky trade.
Very tricky. And let’s leave that and quick to gasoline. What do you think of gasoline went seasonally? When do we make the highs? Is it in June?
Yeah. And gasoline, you know, unfortunately it doesn’t really look that interesting. You know, the, the demand is really flat. If you look at the CIA numbers like the last three or four years, they have it a averaging 9.3 a day for the, for the u s is really not, the growth isn’t going to come here. The growth is going to come, uh, is going to come elsewhere over the next, over the next couple of years. Uh, India, China. Um, and then, and then as we move into the early 20 twenty’s who’ll be with, um, the, the alternative vehicles and we’ll see where that shakes out. But in the short term, uh, gasoline global growth is, is not going to be u s stock inventories are, um, you know, the, the right around last year there a day ahead of the four year average. It’s just that it doesn’t really look, that doesn’t really look that interesting.
Jim. I don’t think gasoline provides any leadership. However, what’s interesting is diesel diesel is unbelievable because, you know, you looking at inventories that are, uh, just from the day’s supply, uh, 29 days versus 38 last year with nine full days over last year and six under the four year average, heavy diesel, he a distal it’s here. And, um, you know, your, your looks looks not as tight as here, but, but um, diesel looks still looks bullish. We really have to start, you know, cranking out some, cranking out some diesel yield, you know, in order to start rebuilding these inventories. And what’s interesting is the yields have been lower yields a way lower and the distillate yields are, are way lower because refiners are running, uh, more the waxy sweet cream, you know, more of the Waxy Permian crudes and um, they’re not yielding as much diesel. Right.
So we, we need more Venezuelan crude coming. We actually Canadian and we need Venezuelan. Howdy. Oh, we’re not getting any of those. Uh, the fact that diesel is, you know, it looks pretty bullish. Um, anything, we’re going to wrap this up in anything you want to say about crude spreads, the structure that gasoline cracks, he cracks you kind of of, yeah, I think he cracks still should, should be a pretty strong gasoline. Cracks are already coming off and um, you know, unless unless refiners, unless they’re continuing issues and there are some, you know, I don’t see much on gasoline cracks. They like these little cracks. Chet fuel’s spin all over the place, of course. And NAPFA looks, you know, that, that, that looks a little bit bearish. Um, to the spreads structure. I make all my goodness, just take a look at these red ds on Tai and on and on brand.
I mean, it’s come off that [inaudible] versus 19, this come off really hard, uh, with the prospect of, um, you know, more, more barrels coming on the market. Yeah. I think that that is a chance to rally back as we, as we draw stocks. Uh, but if the IAA is right, you know, you look at a place later in the year to be going short, you know, how to solve the front and, uh, and by the backs now and one last thing, Jim, on the, on the brand tis when assets become strap a could become stranded. Like, you know, Midland is right now, those things, those things have a chance to go much, they could get weaker.
Right? Right. So we was, uh, we saw that, um, Brent ti I spread that would be, you know, the cushy futures, Wti Price, uh, get to something like mine was 27 did, it gets passed 27 on the way down. I heard so many people say, I’m buying this for mean reversion because we’re going to, and it was crazy. It was crazy. Me Mean reversion probably killed more traders and I don’t, I dunno.
Yeah, it did work as a neutral is right up there to, let me tell you something. That means the Frente, I mean reversion, you would’ve had to roll your position for years. You could have said, yeah, you see, I told you it was going to mean revert. Yeah. But some of those roles gapped so you weren’t able to participate in every yeah.
So you know, just I guess a leave, leave this session with, just be careful. It’s a, it, even though the option world’s telling us this is a quiet market. I think Andy, what you pointed out is there’s just a lot of stuff out there and this thing rock and roll in either direction.
Yeah. I think it’s a really interesting market. This show, this should be some good trading. Um, some good trading opportunities come coming up I think. Um, but it’s never easy.
No, it’s not easy. So a couple of, a couple of things I want to say. One thing is I take, I I’ve been putting stuff up on our blog, just these are basically mostly energy stories but a commodity stories that I find interesting and maybe helpful to, uh, people who are analyzing or trading the markets. And then I’ll try to take one of the best of those and uh, put it on my, uh, Linkedin, uh, um, uh, system. So if you’re, if you want to get connected on Linkedin, just look me up. It’s under James Coburn. I’ve can, I connect with everybody. So, uh, feel free to do that and maybe we’ll get a discussion for, I think a couple of we putting any Furman’s a conversation up there and on Linkedin, on the, on the the website as well. So, um, you know, check them out if you get a chance.
Yeah, that is slightly, that it’s an excellent, excellent conversation about hedging. And a piano of it. Listen to it. I urge you to walk, run, don’t walk to, yeah, to, to our website. We’ve got a lot of hits on that one. Eight w www commodity research group.com cause it’s on there. It’s really good. Okay. This is Jim Colburn and Andy Lebow, a commodity research group.com. Talk to you next month.