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
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
James Colburn
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.
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Transcription
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.
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This podcast should be construed as market commentary, merely observing economic, political and market conditions, and is not intended to refer to or endorse any specific trading system, strategy or recommendation. We are not responsible for trading decisions taken by anyone. Information is not guaranteed to be accurate. This is not an offer to buy or sell any derivative.
Today is February 20th, a little after 11 a.m. New York time, and Andy, I’m sure that there’s a lot going on. I’ll give you a choice of where to start.
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We can talk about Middle East tension OPEC plus policy. Uh China demand. US oil supply. Why don’t we start there? Okay, I’ll pick, um, door number four. Then let’s start with let’s start with us. Uh, crude production. Always a good place to start. And, uh, a key variable in global markets, but no question, currently crude production, which dipped a lot in January from 13 three, you know, down, down into the low 12 because of the freeze outs. Uh, has now rebounded to 13.3 million barrels a day. Now, what’s interesting is that the EIA is saying that US crude supply is going to decline from here on out. In 2024. They have 2024 production at 13.1 million barrels a day relative to where we are now at 13.3 million barrels a day. And that one is really hard to justify. In fact, uh, I think that that number is is going to prove much too low. The market has now rallied back. Even the the back of the curve is rallied somewhat. And uh, I think we’re going to see certainly Exxon didn’t buy pioneer to uh reduce production. And uh Chevron didn’t buy Hess last year to, uh, reduce production. You might see some independents try to say, yeah, we’re going to maintain discipline. But, Jim, I can’t imagine that US production is going to decline from, uh, from here on out. All right. What do you think? What’s in their model that is predicting that you think it’s based on price read counts all the above. Yeah. You know, I don’t like a lag price. Yeah. Maybe maybe a lag price. Maybe they look at where the, uh, where the investments are. They certainly look at where rig count and the, uh, drilled but uncompleted wells are. And certainly the depletion has got to be in their, uh, in their model.
But, um, as I said, it’s really hard to, uh, to see coming off particularly I think well, Permian is, is, you know, I think is still bound to grow this year. And, um, you know, we’ll see what happens in the Bakken where Hess is really strong. So, you know, I would and I just saw an article actually about, uh, Bakken production, uh, looks to rebound this year. So, um, you know, I think the number is going to be rather than, uh, 13.1, you know, I think it’s going to be closer to 13, four, 13, five, something like that. So is it can they this this number that 13 three is off of the weekly numbers and it gets, uh, revised, um, right with the monthlies. But um. Do you think it’s actually three? Can they bring back? I mean, it was almost a million barrels a day lost. Can they bring back that much that fast? Uh, yeah. Do you believe that you like that number is what I’m saying. Yeah. I mean, maybe it’s 13 two, but I. Yeah, they came they came back pretty quickly. So I think and there was other growth in that besides the, the return. So yeah I think the 13 313 two, 13 three for right now is, is uh is correct. And speaking of the freeze, what’s the status with refineries? Well, that’s a big that that, of course, has been a major factor in, um, in this rally back up from 70 to to almost 80 today on the, on the nearby and expiring March because there’s been, um, unbelievable strength in the in the refined products cracks really rallied sharply both the both diesel and gasoline. Um diesel. Diesel crack almost got up to $50, which is unbelievable. And the reason is that, uh, refineries not only are taking fairly large turnarounds in February and March, but we lost a significant amount of, uh, refinery capacity owing to the the freeze outs and some, some plants.
Just, you know, some of the management said, all right, well, you know, we’ll just we’ll take the turnaround. So, you know, we’ve seen runs go from before the freeze. They were running at like 16.6 and they’re maybe not that high. And now they’re 14.8 million barrels a day. So you know that’s really you know that’s really come off obviously. Uh, and we’re not making uh, we’re not making enough diesel or enough gasoline right now. With the, um, you know, the can you talk about crude oil structure? Crude oil rallied as well despite. You know, the crude production coming back faster than. The wrong. Yeah, I think it was right. And I think it was, um, dragged up somewhat by, uh, I think that you had somewhat, you know, what should have happened. The cracks rallying makes a lot of sense. Yes. That that you could get. And by the way, the crude run number is 14.5, not, uh, 14 eight. So okay, that down significantly. But getting back to the the cracks. Yeah. They should have rallied because we have refinery issues. What is. Not quite. It doesn’t quite work, Jim. Is that the market has gone big. Backwardated. Right. Uh, it looks like, you know, there’s some marches expiring today. That spread went out. What did we see? 139 was higher than that. It’s up. It’s you know, who knows exactly in the in the march. But that should have flattened out, right? Not. And, uh, not gone backward. Dated. So, you know, that one’s a little you know, that one’s a little harder to, uh, harder to explain. And if you look at where crude inventories are, at least in the US, they’re running around normal. There may be like half a day supply over the five year average. So all that leads you to believe that the curve should have been flat.
But it. Is it? It isn’t. Um, and it’s also the same thing in Brant as well. We’ve seen a strong curve, right? Right. Brant Brant is saying strong. And there too. You would think that, you know, one of the big things in Europe is that. Russian. You know, Russian products have been because of the drones being hit. Uh, the Ukrainian drones. The Ukraine is going after Russian petroleum assets. Mhm. And they hit a couple of refineries and the. They hit, which has tightened up the diesel somewhat as well as as well as gasoline. But, you know, you’d expect that exports of Urals or it doesn’t go to Europe. But if you look at a broader picture, you know, you’d expect more Urals to be out and that the curve would flatten, but it hasn’t. Right, right. Yeah. So, um, it’s it’s interesting, um, to look at, uh, you know, what we read and what we see, it doesn’t, doesn’t always work out. Although the IEA pointed out something about stocks on land, stocks on the water. And maybe you could talk about that as well. Yeah. And that is probably if if we look at stocks on land, they said at the end of January there was a massive draw and that stocks on land were the lowest since 2016. So. So that you would think, you know, okay, I could take that and argue for, you know, certainly you would argue for, for a backwardated market. And that’s got to be, you know, that that’s got to be it. Stocks on water though were growing certainly because of um, some of the, the issues in the, in the Red sea, uh, with ships having to go around Africa so you could see stocks on water growing. Uh, but meanwhile stocks on land have been drawing and yeah, maybe that maybe that’s why you’re probably more than maybe I mean, that’s a possibility.
Uh, as to why Europe, uh, or Brant has gone so backwardated. Yeah. I’ll be interested to look at the, uh, US exports to Europe. I wonder if that’s going to pick up as well. Like, you know, maybe that’s what’s caught because, you know, now their Brent’s got a little bit of uh was it Midland crude in their in their formula. So so so maybe we’re seeing some uh. More. This, you know, maybe recent, uh, more, more, uh, exports of. U.S. crude oil to Europe, I don’t know. Interesting. Earlier this month, uh, CEO of oxy. Uh, Vicki Hollub. Uh, Vicki Hollub. Right. Yeah. She said, uh, she was quoted as saying in a couple of years time, we’re going to be short on supply. Why don’t you comment on that? Well, you know, there’s nothing like a CEO of an oil company talking her position. I mean, it’s it’s it’s great to it’s great to hear. Uh, particularly if you’re an oxy shareholder. You know, it really flies in the face of some of the thinking about 2025, because already, you know, there’s a lot of chat about how horrendous 2025 is going to be, because there’s going to be all this new non-OPEC production coming on, on and OPEC is going to be unwinding their, uh, production cuts. So you already have a lot of hand-wringing about, uh, 2025 and, uh, and beyond. Well, 2025 and maybe into, uh, 2026. But I guess she’s looking beyond that to the, to the end of the decade. And, um, is hopeful that some of the investment money that wasn’t spent earlier this decade will lead to, uh, a tightness in, uh, new supply. But I, you know, there’s been a lot of there’s been a lot of gains in offshore supply. So, you know, I’m certainly you know, I’m not sure I bet all that much on, uh, you know, on what Vicki Hollub is saying.
But again, she may not be wrong, right? I mean, you don’t you don’t see it in the curve, right? I mean, you don’t see, uh, you don’t see it in the curve. You definitely don’t see it in the curve. I mean, the you know, the cows back there are are much cheaper than the, uh, than the, you know, than the 2024 cows. Yeah, I guess there was a couple of years ago, we we had that drumbeat of, uh, you know, uh, lack of investing is going to when these oil companies, uh, uh, started getting discipline or people are talking about we’re going to have a shortage and then, you know, a year out and we actually saw people putting money down and, uh, you know. Lots of out of the money options upside were bought to play. You know, the coming shortage of crude oil, uh, due to a lack of investment. And, um, if I there may have been bailed out by, by the war, I’m not sure, but, you know, it didn’t quite. It moved up, but prices moved up. But not not quite as people were expecting. So, um, but we’re not seeing that now either, so nobody’s not quite reacting to that. So let’s we we usually have this we try to have this podcast after the big three OPEC, IEA, EIA uh came out with their uh monthly oil reports and discuss the uh differences or the numbers you disagree with. But, um, you know, if there’s one word that comes out of this is, uh, is pretty much balanced. Yeah. Once you comment on on what you saw. Now if you look at. The big you know, the big three OPEC, IEA and the IEA. Of course we don’t really we don’t know. We’re not going to know where OPEC production is. So that’s a guess. The EIA puts out their guess. And they see rising OPEC production. But if you look at the EIA numbers they have uh a big draw in the first quarter.
And then the second which I tend to agree with. And then the second, third or fourth quarter they have like up 0.1 million barrels a day. That’s 0.1. So for the year, given that there was a big draw in the first quarter, they’re down 0.11. So balanced as as you said uh looking now OPEC is not OPEC has big demand gains I don’t know where they you know how they’re seeing it. But they have a 2.2 million barrel per day demand gain over um last year. And if you if you put all their numbers together and use, you know, your best guess as to OPEC production, they’ve got a draw of 1.4 million barrels a day for the whole year. So that’s that’s pretty bullish talk again talk about talking about your book you know yeah compounding your book. You know if these OPEC numbers are right it’ll it’ll allow a quicker unwind of uh of the cuts and the IEA to actually they don’t they don’t have much of a they don’t have much of a draw in the first quarter. Uh, but if you look at all their numbers, they have a draw of around 300,000 for the year. So a slight draw. Um, actually less than that. I’m sorry, 100,000. So again balanced. You know, everybody’s looking for balance. And CRG are our numbers. We’ve got a draw of 600,000 in the first quarter and then slight draws in the rest of the way for a yearly draw of about 250,000, which is nothing, you know. No, it’s all balanced. Right. Uh, which is why I think, you know, the market is, um, you know, we’re in this we’re in this 70, 80 range. And, um, you know, it’s there’s not a lot of enthusiasm on on trading crude right now. Um, yeah, there’s a lot that can happen, obviously, but, um, well, we’re, you know, we’re commodity guys, and, um, we don’t think about comment, like saying the market’s going into a new normal.
That’s kind of like we think about a new chaos. So last month I was uh, uh, given the EIA a hard time because they had their price forecast. You know, you, you have this straight line going out for two years. And I said that, you know, that’s not going to happen. But so far they’re right. And I know and they you know volatility in crude oil on October 14th um was 44.5. And on Friday, uh, the first two months settled at 28. And you can think about all the crazy headlines we’ve heard since then. And this market is just gone very quiet, uh, from an option standpoint. So, so yeah, I think, Jim, that the, the action has been on in refined products. Right. You know, the cracks, the curves although there’s action in the, in the crude curves. But I think the real, you know, the real money if people had it right, you know, has has been on uh, on the refined products side because those, you know, those are moving but, you know, crude is contained in this range. Yeah. It’s it’s, uh, it’s definitely showing up in options in other ways. You when I looked at the outstanding or the top, uh, like open interest strikes in Brant and WTI options. Um, they’re strikes that, uh, built their open interest a while ago. So, so the top number, the top call for Brant is a 110 call in June. It’s got 49,000 open interest. That’s a good number. Uh, but it was put on you know, I don’t I can’t I can’t even tell. It was a while ago. Yeah. Uh, you know, and then June 1st hundred calls got his 33,000, uh, June 85th calls, 32,000. So these, you know, these have been on for a while, and and WTI has one of those wacky 50 cent call strikes in May. Uh 76.5 77 call spreads 61,000 open interest. That’s a huge number.
People were doing these a lot you know over a year ago. Uh and I’m not sure I didn’t see this. Go. It’s, um. I’m pretty sure it’s been on for a while. And then the one behind that is the DS 250 call at 24,000. So when when the heck was that put on? So. Oh, man. You know, and you could puts the same thing there in Brant. It’s the June 75th 70 6560 puts in in WTI. It’s uh the June and D 60 puts um the DS 5565 puts. And those are small small open interest numbers. So I’m not saying it’s not trading. It is. It’s just uh it’s got that balanced look to it. Basically the the paper flows all over the place. However we have seen this decline in vol that, that I mentioned. That’s probably the big the biggest story is that, uh, the EIA was right. It’s balanced. There’s a headline right there. Yeah. No, I mean, yeah, it was right. Yeah. I have to be careful because I’m not I’m not putting down their intelligence. I’m putting I’m just saying it’s really it’s really hard to do. It’s hard to do. It’s impossible. It’s very difficult to do. And they’re also going against the grain where like I said, as a commodity person, you’re, you’re you have a little, uh, PTSD built into you where, you know, or some kind of nervous tic because you’ve, you’ve, you know, lived through some of these, uh, crazy markets. Um, and we, you take it day by day. So, you know, you know, it’s like, oh, we’re in a new normal. Uh, I don’t think so. Um, don’t get me going on value at risk, Andy. Uh, we’ll skip that topic for now. We’ll skip that topic for now. Okay. So, um, let’s talk about, um, China demand. Somebody asked me at a at a dinner a while ago if I thought we were going to see a supercycle in commodities this year, like it was. It was late last year.
And, and I asked them, uh, what do you think of, uh, the Chinese economy? And he said, I don’t think it’s going to do much. I said, well, then I’d say your answer. You answered your own question, right? Would you say that’s I think that’s I think that’s too much. I think if it shows, you know, some the growth is expected. I can’t I can’t remember off the top of my head what the IMF was saying about the China, uh, GDP. But obviously they’ve had a lot of, uh, a lot of structural issues. And, you know, last year they came up with a decent demand growth. The the IEA has them, uh, they were way up on, on Chinese demand. We, we, I think we were up in CRG was up a million. I think I, uh, the IEA was up one and a half, but a lot of that was because was, uh, comps, you know, the comparisons to, uh, 2022 when they were still in, you know, they were still in lockdowns. Right? So, you know, the demand that, yeah, they had a good demand growth. But that’s because 2022 was so crummy. I think 2024, you know, I think uh, probably get half 1 million to 600,000 barrels a day, maybe, maybe slightly more than that. But I don’t think it’ll be a, you know, a boffo year in, uh, on Chinese, uh, petroleum demand now they’ve done. Yeah. And they’ve done this throughout the years. You know, they’ve done a good job of, um, trying to trade really, um, in terms of, you know, when the price is high, buy less, the price is low, buy more. And they’ve been able to do that because they’ve got, uh, decent amount of, you know, they’ve got enough inventory to, to play it that way. So another reason why, you know, the market, you know, has been contained in this, uh, contained in this range.
You know, they certainly bought less in the when the fourth, when the third and fourth quarters were, you know, were making new price highs. Um, and maybe I think they bought a little bit more, you know, in WTI was dipping down into the low 70s. And Brant was also into the, into the uh low 70s. So they’ve done a good job in, you know, managing inventories. And um, to a certain extent, you know, managing the price risk. And, um, what do you what do you want to say about, uh, OPEC plus, uh, policy going forward? Well, they’ve got a, they’ve got a meeting coming up in in March. Uh, I get the sense there’s not going to be any, uh, big changes for, uh, for second quarter. And it’s going to be, you know, the next meeting may be in May or June after that, when they’ll see if they can, you know, unwind some of the price cuts. Demand may be strong enough to allow them to do a little bit, you know, a tiered un type of, uh, type of unwind, you know, there in terms of. Who’s cutting and and what the market’s not expecting them to comply to all their cuts and they haven’t um you know there’s been some cuts from um Kuwait of course, but Iraq, UAE a little, little bit slower on uh trying to comply. The wild card of course is Russia. You know, they may be able to comply on their. On the totals because, you know, they may have more crude for sale. We’ll see. You know, we’ll see in the next in the next couple of months. But, you know, I think. You know, the I think the Saudis are canny enough that they know they can’t un do all their, you know, they can’t unwind their a million barrels a day right now. You know, the markets certainly not not there. You know, maybe if maybe if they could see the market get up to into the mid 80s to 90, you know, they can start an unwind.
Interesting. Uh, there’s a story in, I think, the Wall Street Journal today about how the Saudis are, um, uh, needing cash for all their expensive projects that they’re spending money on. Right? So they don’t want they don’t want to see the market. They don’t want to see Brant, you know, in the low 70s, high, high 60s, you know, that’s, uh. You know that that they certainly don’t want to see? Um, I think they could live with 80, uh, 75 to 85 something, something like that, you know, and then amongst some of the other, uh, OPEC countries, um, we’ll see if the US tightens up sanctions on Iran. There’s been a lot in the press lately about, uh, how how we’ve sort of allowed Iran to export more, uh, and Venezuela. We’ll see if, you know, we’re trying to loosen the sanctions. And now they’re building they’re massing troops on the Guyana on Guyana’s border. So, you know, we’ll see whether or not the and then production has been going up a little bit. Um, so we’ll see, you know, whether, whether that gets, uh, tightened and there’s always, you know, and there’s always Libya as to, you know, they had production cut in January, uh, December. And January because of, um, the strikes or, uh, because of something, because their usual. Their usual issues in, uh, in Venezuela between the two governments and in the east and the west and, and the knock in Libya. So, you know, they they the surety of supply coming from Libya is certainly not great. And that’s an understatement, right? I was I think about, uh, Venezuela troops on the border. I’m thinking what’s what’s the policy there? They want to take over the production of Guyana and, and turn it into zero. Is that what the deal is?
That’s that’s what they did with their own stuff, right? I know, yeah, I don’t get it, but. Well, they, they, they say that there’s a, there’s a disputed land. No. Of course, uh, which they, you know, they claim is theirs. Of course it has. Some of it has the oil. I don’t think there’s anything going to happen, but. You know, there’s something. It’s an event that could happen. It could happen. That’s right. That’s why. Yeah. And walk around nervous about the markets all the time. I’d rather be an option buyer in oil and seller if I can. And that’s because all this stuff that you just sleep, sleep better at night, you haven’t even spoken about the Middle East. Well, that’s that was the first thing I mentioned with topics for you to pick. And, um, let’s talk about that. The Red sea stuff is flowing through. But, um, stuff is also going around. Uh. I think Wood Mackenzie had something out that said 20% of, uh, oil tankers are using the long route. Yeah, I think that that’s about right. I think that’s about right. Um, let’s say roughly 2 million barrels a day. Something like that. A million and a half to two, maybe more. Um, so it’s definitely had an impact on shipping costs. And, uh, there’s been dislocation and the despite the US bombing of, of, uh, in Yemen, um, and in Iran, uh, the, you know, the attacks, there was just another there was one. Was it Friday? You know, there’s one two days ago which the crew had to abandon ship. So that doesn’t look like it’s, uh. You know that that’s not. Changing. I mean, it doesn’t it doesn’t look like it’s quieting down any. Uh, and of course, the Israel’s dealing with Hezbollah in the north, and they’re threatening to invade Rafah. So we still haven’t lost any, any supply.
And, uh, hopefully things quiet down somewhat there, but. Right. You know that it’s it’s still a factor. Day by day thing. Yeah. Yeah. It’s a, it’s a, it’s a day by day thing. Exactly. Yeah. Which? Which would you rather be right now? An oil producer or an oil refiner? I would rather be a producer because the, um, you know, the all this capacity is coming back. Uh, there is new. There is new refinery capacity in Africa. There’s a giant 500,000in Nigeria. There’s a giant 500,000 barrel a day refinery opening up in the Middle East, there’s more capacity and in China, more capacity, both. Probably more next year than this year. But, you know, there’s growth in refinery capacity. And the other thing is nobody wants to buy a refinery. You know, they’ll build them like in the US. You know, refiners have been trying to, um, the Houston refinery, you know, they’ve been trying to sell that for years now. And, you know, there’s not there’s no buyers. So they’re just going to close it. Mm. Um, so, you know, I think I think I’d rather be. Yeah. I’d rather be a producer. At least you could sell your company. You know, we’re seeing all this, right? You know, we’re seeing all this consolidation and, um. You know there’s value there, right? Uh, it’s this this energy transition is, uh, very interesting. And I just wanted to ask you as an analyst, you know, you you contend with, you know, EV sales cutting into gasoline demand. And then on the other side of this is, uh, increased, uh, hydrocarbon demand, I guess mainly for plastics, but, uh, other things as well. So many things are made with, uh, petrochemicals. So on the one hand, you have a sharp increase in demand. On the other one, you have one that’s tailing off.
Um, how how do you deal with that in terms of coming up with your numbers? Well, a lot of it is, uh, guess as to what the, you know, where EV sales are going to be this year. Well, last year, I think they were 121 1.2 million. And this year this expectations that it’s going to be 1.6, 1.7 million. So you know that just back of the envelope stuff, you know you’re losing uh 100 to 150,000 barrels a day of uh, gasoline demand something, something like that. And of course, globally, you know, we’ve seen tremendous growth in, in China. But what what’s been interesting is there’s definitely consumer pushback from EVs. So, you know, on on the EV front, in terms of, uh, range and colder weather and being able to. Well range and called the weather plus, no, not enough charging stations. Um, so it’s possible that we don’t meet, you know, we don’t meet those numbers. And certainly it looks like the bigger trend is that the transition is backing up in terms of, you know, it’ll take longer, which you and I knew we’ve talked about this for years. Yeah. It’s and I guess, um, Toyota had this idea that, uh, hybrids would be a better way to go because, you know, you sort of maximize the, uh, the use of the metals across, you know, wider range of cars that would kind of be in, um, operate operating more hours and stuff. And I actually have a hybrid. And it’s really, uh, it’s really nice because I don’t have to depend on our, our energy grid, which is being taxed more and more because, you know, they are pushing to be really green and they want to at the same time, they want to electrify everything. So it’s a very, um, it’s really hard to, uh, get that balance right. And and so far, so good.
They, you know, we’ve had we haven’t had interruptions of power through some major storms, but, you know, it’s going to happen more and more. And, you know, in a winter time, I. New York put a big push to get people to, uh, install heat pumps. And I look at which I did, and I look at my electric bill. And these things use a lot of power during the heat. Not not during the cooling times, during the winter time, the, the use so much electricity. And, um, you know, if you’re if you’re charging a car in the cold weather, uh, you’re, you’re putting a lot of stress on the grid. So it’d be interesting to see, uh, how this all turns out. And I just before we wrap it up, I just wanted to mention, um, you know, that I mentioned the. The option flow looks kind of like a normal or a balanced market. It’s not so much in, in, in, um, natural gas options. Uh, I posted something on LinkedIn last week or on Saturday, and it basically shows that we’re in this free falling, uh, natural gas market. And yet the, uh, the options skew is flipped. So it’s kind of like it’s gotten very, uh, to the bullish, uh, side. So skews to me. They don’t they’re not really meaningful. They each each market has its own skew. Crude oil is uh tends to be you know put put volatility is over call volatility. You know if you look at a 25 delta I think the front months like minus three right now call over I’m sorry. Put over. And then you go out to December and it might be minus five. So uh we’re natural gas can be the opposite. And um uh anyway that’s flipped. So I just want to see today we’re down. I want to see if we’re close to, uh, reaching a bottom here. So keep an eye on that. Uh, yeah. That move has been unbelievable. That move has been incredible.
Oh, yeah. Yeah, yeah I was I don’t know, over $3 just to. You know, as we went into the went into the freeze and now we’re the dollar 50 something. Yes. Relentless on the way down and, uh, uh, we’ll see a lot of heavy volume. It’s not one way, but, you know, like I said, the there are more puts trading than calls, but open interest is going up and puts as well. So it’s not it’s not 100% liquidation. Uh, but we are seeing uh, like I said, the skew has uh kind of flipped to the to the more it has, the more if you just looked at the options, you say, well, this market has a little more bullish look to it. And I’m not saying the skew is an indicator. I just look for times when, um, things are different than they have been recently. And that’s the case. Um, anything else Andy you want to include in this month’s podcast? No, I think we, I think we’ve, uh, we’ve covered a lot. There is a lot going on. You know, the market has been in this range, but still, uh, you know, as we mentioned, the product markets and you just mentioned the natural gas market, which is, you know, really been the the one way moved, one way moved down after one way move up. Right. But, um, yeah, there’s certainly a lot to be paying attention to in this, in this market. And it sounds like, uh, you expect more of the same. You’ve all balanced. And so to me, that’s maybe a, if a slight draws, maybe a grinding sideways to slightly supported market going forward. Yeah. That’s I mean, we, I think we said that for the last the last podcast grinding sideways. Um, you know the market did get did get hit on false rumors of, of a cease fire. And um, also I think concern about the, the, um, you know, whatever the, the concern about the economy, whether or not the fed was going to cut, uh, brought in a lot of brought in some speculative flow from the downside.
And, um, you know, that flow was, was wrong actually, in, in retrospect. Wow. You know, it’s listen, these are tough markets but economists are this is not their better days. Definitely not. We didn’t get the recession. I’m wondering do we do we get a recession now that everybody everybody’s on board for growth. Uh, so I always try to think of what’s the most sort of the least, uh, expected outcome. So when over a year ago, our other partner, Ed, we were talking about, well, the only thing that people aren’t talking about is strong growth with declining inflation. And we weren’t we weren’t predicting it. We were just saying this is what we’re not hearing as a possible outcome. And that’s what happened. And and now the the outcome would be that the fed actually raises rates before they lower them. There was just an article. Oh no really it was in Bloomberg or the Wall Street Journal. Oh God. About you know, the the if you look at the options markets, you know that there’s a chance that they actually raise rates. Oh good. That’s that’s that that’s creeping in. Great. Great. Right. Yeah. Yeah. Okay.
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Thank you very much, Andy.
Do you want to tell people how they can get in touch with you?
Yes. You can reach me, uh, at alebow@commodityresearchgroup.com, and or through our website, Commodity Research Group and LinkedIn.
Yeah I do more stuff on LinkedIn these days. So if anybody’s interested, connect with me on LinkedIn and I post some articles or things that I like.
The podcast will be up probably by later today or tomorrow.
All right. Till next month, Andy.
Till next month.
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