CTA performance… BarclayHedge

by Jim Colburn • Monday, February 27, 2017

BarclayHedge (not the bank) shows CTA performance over the years in a table and chart:

What a difference in returns between the decades of 1980’s and the 2010’s!  Might the amount of assets under management by CTA’s have something to do with it?  Also from BarclayHedge is a table showing explosive growth in Money invested in CTA’s:

And, related to oil, from Reuters:

“Money managers also raised their bullish U.S. crude futures and options positions in the week to Feb. 21 to the highest on record, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Investors now hold 951,312 lots’ worth of U.S. and Brent crude futures and options, equivalent to nearly 1 billion barrels of oil valued at more than $52 billion, based on current Brent and WTI benchmark prices.”

Is this a bullish or bearish signal?




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A bull market… in sand?

by Jim Colburn • Monday, February 27, 2017

SL-Advisors discuss the growth and expected growth in sand use due to fracking demand:

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Saudi, Iraq exports to the US expected to decline… EIA

by Jim Colburn • Friday, February 24, 2017

In This Week in Petroleum, the EIA does a nice job with the changing economics of US imports from Saudi Arabia and Iraq…

“The price difference between Dubai/Oman medium sour grade oil, which serves as a benchmark price for similar grades produced through the Middle East, and Mars, a U.S. medium sour crude oil with similar properties, was at its lowest level for several years in 2016 (Figure 4). Under such pricing conditions, medium and heavy crude oils from Saudi Arabia and Iraq were attractive to U.S. refiners because they produced a profitable slate of finished products when processed in complex refineries. ”

Due to time lags we are still seeing high levels of imports from the Gulf:

“Given transit times, cargoes exported from Saudi Arabia and Iraq in November and December 2016 would be expected arrive in the United States between December 2016 and February 2017. Imports from Saudi Arabia into the United States increased for five consecutive weeks, rising from 1.0 million b/d for the week ending January 6 to 1.3 million b/d for the week ending February 10. Similarly, U.S. imports from Iraq grew for five consecutive weeks, increasing from 373,000 b/d for the week ending December 9, 2016 to 723,000 b/d for the week ending January 13, 2017 (Figure 3). ”

“After OPEC announced crude oil production cuts in late November 2016, the relative price of Dubai/Oman crude oil rose because supply reductions pledged by Middle East producers disproportionately affected medium sour crudes. In January 2017, the premium of Dubai/Oman over Mars reached its highest level in over a year, which is likely to encourage U.S. refiners to process more domestic medium sour barrels while reducing imports of comparable grades from the Middle East.”


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Options update….

by Jim Colburn • Friday, February 24, 2017

Implied volatility settled yesterday at 24.6%, its lowest level since 10/9/2014…

Of options related to crude oil on the CME, the one with the most open interest is the Dec18, WTI/Brent spread, flat or zero call… This option has 49,900 contracts open and settled yesterday at $.99… A buyer of this call has the right to go long Dec18 WTI and short Dec18 Brent at a zero price differential…  The buyer expects WTI to trade over Brent which, of course, would be the expected outcome should a significant tax on imported goods be enacted…

The next largest open interest is on the December $60 call with 48,031…  June 60 calls show 46,778 contracts open…

Here is the implied vol chart going back a few years… This series is based on the at the money, second nearby option:

Record lows were made on 6/6/14 at 12.7, record highs on 1/14/91, 135.4…

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Break-even price rising… Matt Smith, Oilprice.com

by Jim Colburn • Wednesday, February 22, 2017

In Matt Smith’s summary at oilprice.com, he includes an interesting chart on shale producers’ break-even prices:


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Managed money is extremely long Brent…WSJ

by Jim Colburn • Tuesday, February 21, 2017

The Wall Street Journal ha a nice chart showing net length of money mangers in Brent crude oil here:

“Managed-money accounts increased the number of long positions, or bets on rising Brent prices, to the equivalent of 525 million barrels of crude, while cutting the number of short positions, or bets that prices will fall, to 44 million barrels, according to the Commitment of Traders report from the ICE.

In the U.S., wagers on rising oil prices have hit their highest point in more than 10 years of record-keeping by the Commodity Futures Trading Commission.”

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Howard Marks talks to Barry Ritholz on a recent Masters in Business podcast…

by Jim Colburn • Tuesday, February 21, 2017

Mostly excellent:


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Worst Gasoline Glut in 27 Years… WSJ

by Jim Colburn • Sunday, February 19, 2017

The Wall Street Journal writes about the gasoline glut:

“U.S. gasoline consumption plummeted last month, nearly matching a 15-year low, government estimates show. It fell to as low as 8.2 million barrels a day, averaged over the four-week period ended Jan. 27.”

“January sales at the pump fell 4.4% from a year ago, according to data from the Oil Price Information Service. That has led to a record amount of surplus gasoline, the U.S. Energy Information Administration said Wednesday. Storage levels swelled last week to 259 million barrels, the highest in EIA records dating to 1990.”





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Sinochem investing in Noble… Bloomberg

by Jim Colburn • Thursday, February 16, 2017

Bloomberg reports that Chinese state-run Sinochem is in talks with commodity trader Noble:

“The Asian nation’s state-run Sinochem Group is said to be in early talks to become a strategic investor in embattled commodities trader Noble Group Ltd. A potential deal could give the Chinese oil and chemicals behemoth access to Noble’s trading expertise and businesses around the world, from gasoline blending on the U.S. Gulf Coast to petroleum storage in Panama and fuel transport via American pipelines.”

“Noble Group offers access to a trading network spanning continents. The company traded 950 million physical barrels of crude oil and refined products via ship, barge, pipeline, truck and rail in 2015, 32 percent more than the previous year. It’s one of the biggest gasoline blenders in the U.S. and supplies products to the Colonial and Magellan pipelines. It has petroleum storage facilities in Panama and Europe, and is also a major coal and LNG trader.”

The deal makes sense:

““On the one hand Noble is in need of cash, on the other it can add supply-chain value to Sinochem’s existing trading business, and they can be complementary to each other in products, regions and portfolios,” said Li Li, an analyst at industry researcher ICIS China. “There is certainly a pattern for a rich China Inc. to invest in a quickly growing trading house with a specialized focus.”



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Falling correlations across asset classes…WSJ

by Jim Colburn • Thursday, February 16, 2017

The Wall Street Journal cites a Morgan Stanley study:

“Cross-asset correlation recently fell to its lowest level since 2006, according to a Morgan Stanley analysis of 34 indicators tracking the relative performance of different asset classes and regions.”

The article goes on to suggest that the correlation decline is due to less central bank stimulus:

“Past indications of lower correlation haven’t turned into a more lasting breakdown. But the massive central-bank stimulus that investors say spurred the correlations is either beginning to, or is expected to, tail off, reducing their sway on markets, some investors say. That could create a rare opening for active-fund managers, many of whom suffered significant outflows in recent years as money migrated toward simple, low-cost, index-tracking funds.”


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