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.
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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Today is January 19th. So Andy, the three main drivers of this oil market seem to be, uh, economic growth, China reopening and Russian oil supplies. And we, we see that, uh, there’s a lot of uncertainty because the, the big three, uh, supply demand estimates put out by the IEA, the EIA and OPEC have diverged, especially in the second half where you see the, the IEA and OPEC looking for draws in inventories and the EIA, uh, is looking for builds. So can you kind of square that circle and maybe give us your own thoughts on who’s, who could be right, who could be wrong?
Sure. Jim, the first of all, the, the big divergences are, are on the demand side with the, with them varying by millions of barrels a day. Uh, opec for instance, has a 101.8 million barrel a day global consumption. The I e A is 1 0 1, 0 1 0.7, but the EIA is that our government is at 100.5. So, you know, we’re looking at, as I said, millions of barrels a day of, uh, divergence there. And the therein is their views on, uh, as, as you mentioned, Jim, the economy where they think, uh, where they think China’s gonna come, as well as, you know, first half, second half growth. I have to say that we’re, we’re on the lower, lower end. Um, our numbers are 100.8 for, uh, growth, which is, uh, about up 1.5 million barrels a day from last year. And on the, on the China end, we’re looking for, uh, Chinese demand to be up about 600,000 barrels a day.
Uh, I think the consensus is 800,000 barrels a day. There are some that are looking for more than that on, on Chinese growth. And again, in term, obviously, China’s a, a, a big determinant of, uh, where the price is gonna go and where that growth is, you know, where that growth is gonna come, which quarter is it gonna come? Is it gonna be second or third quarter, third or fourth quarter? You know, I think it’s gonna be, it, it could be pretty craggy as as to how that, how Chinese growth, you know, how it, how it develops. You know, we do see a second half increase in, in China’s, um, in China’s demand, more so than the, than the first half. But again, you know, that’s a big number. Jim, you know, <laugh>, we’re looking at as, particularly since the IEA reported, the Chinese demand was down 0.6 million barrels a day, uh, for, uh, 2022. So, you know, that’s clearly key how the economy goes. You know, most of the, most of the, uh, most of these agencies, you know, are using the same G D P models. And, um, you know, as we know, just looking at where the Atlanta Atlanta Fed is relative to some of the other, uh, estimates, you know, those can, uh, those could be right or or wrong, obviously.
Yeah. There, there seems to be a, uh, sort of default of, uh, plus 2%. You know, these models, if you, you don’t know what’s gonna happen, you just throw in plus 2% growth. But you, you als you also have, uh, draw a second half, is that correct?
Despite your lower, uh, Chinese number.
Yeah. Despite my, well, I, I, I kind of back loaded it for the, for the second half,
Got Oh, got it.
Okay. On demand. Got it. Um, but yeah, I, I am a, I’m lower than some of the other, some of the other estimates on, uh, on demand. And, you know, I just did, I just did revise it upwards cuz I did revise Chinese demand up like 150 a day from my previous estimate of, uh, I think I was at 400 or something. So I did, I did move it, I did move it up. So, certainly, well, you know, that, that, that’s a big number.
So, um, looking back 2022, it seems like, uh, two of the big numbers that were missed were China demand and the amount of crude oil and products that Russia maintained on the market after, um, you know, all the, uh, after the war broke out. Is that, is that correct? Oh,
Oh my goodness. Yeah. Uh, you know, in terms of, uh, in terms of Russia, the, uh, you know, the IA was talking about a loss of two or 3 million barrels a day from, uh, Russian production. And, uh, you know, it’s gonna end up, Russian production is gonna end up pretty close. 2022 production’s gonna end up pretty close to the pre-invasion numbers. You know, maybe down a couple hundred thousand is, is all as, uh, Russia’s been able to open new markets and, uh, change the flow. But I, I think that’s one of the big numbers that, you know, everybody missed. And, and China demand, you know, at first it was going to be everybody was looking for a, a decent growth, not, not a big growth, but some somewhat of a growth. And then all of a sudden it became apparent they weren’t gonna grow at all.
And then finally, as we move towards mid-year, you know, the estimates, uh, started to go to, to negative and, um, you know, it’s coming in 2022 were come in negative to, uh, 2021. So those were, yeah, the market, the market completely missed those numbers. And of course, you know, you look at the, the price, the where the prices were, you know, if you, if you were in the first half of the year and you’re talking about two or 3 million barrels a day of lost Russian production naturally as well as a decent Chinese demand, you know, naturally the market is gonna go, you know, the market’s gonna go higher. Uh, which, you know, which it did. Yeah. Significantly higher. Yeah. I think the ti high was, was, uh, one 30 and the balances. Look, you know, they look very, very bullish.
Yeah, that’s, it’s interesting. I, I, um, I think we saw a lot of those bullish ideas. Um, they, they play out in the option world. In fact, even going into the, um, war, war, the people had the, all the lot, lot of these big, uh, option plays on, on the call side for, for an upside move, and then the war came out. But, um, since then, the even more bullish ideas have not, uh, come to fruition. And I’m, you know, I’m, I’m just looking at the, uh, March w t I contract and I see from July to, to today, the high was a little over 90 bucks, and the low is just a little over 70 bucks, and we’re at 80 right now. Now, I mean, do you think that reflects the uncertainty that around these numbers? I mean, you can’t, you can’t, there’s a barrel counter, I think you’ve said during, uh, you know, 2020 when Covid hit that you have to redo your balances, uh, on a daily basis.
It does. Yeah. Last year. No, last year too. Yeah. It doesn’t, it’s like a daily, you know, a daily redo. And the
Other thing Yep. Sorry,
Go ahead. No, I, I, the other thing that changed was the release of the reserves by, you know, the government release of, of reserves both us and internationally, you know, that that also had a, had a very big impact. So, you know, for the year, uh, for 2022, uh, it, it looked to us and also the, the i e A that we probably built inventories something on the, on the order of a million barrels a day, plus or minus, you know, a couple hundred thousand and, you know, which is equivalent to the, the release of the spr. Right. Uh, but that, that was another, you know, really big factor and definitely contributed to the market, as you said, Jim, uh, you know, coming off into July, and then we kind of settled into this huge, you know, this big huge range and looking where we are on, you know, well, and there’s still, there’s still obviously a lot of uncertainty because there’s, as we just mentioned, look at the difference in these, you know, in these balances,
You know, the, the, so yeah. I, I think 80 is, yeah, I, I think it’s probably close to Right. You know, the price is the price,
Right? Yeah. Right. Yeah. So getting back to, uh, Russia supply, there’s, if you look at the I e A, they’re talking about, uh, maybe losing 870,000 barrels a day due to Russia in, in, um, 2023. Now, is that gonna be due to the February 5th embargo with products or where That’s a little high though, isn’t it? Wh where do you think that’s coming from?
I, I think it’s high. Uh, what’s interesting is OPEC two is OPEC’s looking for close to that, like, uh, 900,000 barrels a day, I think from, of lost Russian supply. Yeah. I think it’s, it’s owing to the, you know, owing to this product embargo coming up. I, I think it’s high. You know, that, that I think that number is, is, is pretty high. But the thinking is that, you know, the Embargo’s beginning February 4th and Russia exports something like, you know, over a million barrels a day of, uh, of products and, um, the, to the eu, it’s something like six or 700,000 barrels a day of diesel alone. So if there’s an embargo, you know, that means crude runs are going to, are going to ha, Russian crude runs are gonna have to decrease. And since storage is pretty high, uh, in Russia, it is really the only way, you know, you’re gonna start losing Russian production, um, as a result of that, you know, as a result of, of the loss of, of products.
Cuz you, you know, you, you won’t be able to, to export and things will back up. So production will go down. I’m not so sure that’s gonna be the case. <laugh>. Right. Um, you know, Russia’s done a pretty good job of, uh, of, um, shifting, its, uh, shifting its markets from, um, west to east and, uh, on diesel. What, what may happen if, if there’s, you know, if they have enough. I, I think the key will be will they have enough tankers to shift the flows from Western Europe to say Latin America and Asia, uh, or South America. And what we’ll pro what we could see is a flow ship from, you know, to Latin America and then US Diesel, which supplies the US and we’ll see us diesel head to, uh, head to Western Europe. Uh, with the net result, in my opinion, uh, I still think there’ll be a loss of about, you know, half a million barrels a day of, of Russian crude, maybe a little bit more. I think 900 is, is, you know, I, I I agree with you, Jim. It’s on the high side
And it, it, uh, we see that, uh, China seems to be, uh, increasing, uh, quotas for their, uh, teapot refineries. These, this is so, is is China basically buying deeply discounted oil from their good friends, the Russians, and then selling it in terms of like diesel on the marketplace. <laugh>, I mean, these, these are what are, what else? What are friends for? Right?
Right. Exactly. You know, they’ve increased their, uh, demand for, for Russian crude, although they’re still keeping a pretty good portfolio of suppliers, you know, that, that they believe that, you know, they don’t want to get too reliant on any, on any one supplier. But, you know, certainly buying Russian crude at 30 or $40 under Brent and Yeah. And reselling it into Europe at a, at, at 40 or $50 by Brent is a great trade.
And India the same. You know, India is the one that really has been, you know, the big consumer of, of Russian crude that used to go to Europe. You know, they’re, they’re, they’re up a million barrels, over a million barrels a day of, uh, Russian crude. And then of course there’s, um, uh, some increases in Turkey and Malaysia has taken a a lot of, of Russian crude. But that’s what that means is it’s going somewhere else. It’s gonna be trans shipped. Uh, you know, the, the end result is not Malaysia, you know, the, the end user is not Malaysia. It’s, it’s either China or, uh, or India.
Interesting. And OPEC in the background, what’s, what, what’s, what are they thinking? What, what’s their policy? They, I mean, we, we kind of thought they were getting a little, uh, bullish by cutting back, uh, the quotas a few months ago, but turns out they were right with demand deteriorating going forward. What do you, what do you see OPEC’s uh, policy?
I think they, you know, I, I think their goal is, is something around 90, you know, 80 to 90, 90 to a hundred, you know, that, that I think would be a, uh, good price range for them. You know, I’m sure they were happy to collect, collect well over a hundred dollars when prices were up there, but I think, you know, they, they’ve realized that’s very dangerous for, for the market to be, you know, to be that high. So I, I, what I have, what I think is their production is gonna be pretty steady here, around 29 million barrels a day, which is where they were in the fourth quarter, give or take a couple of hundred thousand barrels a day. You know, it’s interesting, Jim, the next meeting, the next ministerial meeting isn’t until June. Um, they’re gonna have once every two months, they’re gonna have, the market monitoring committee is gonna meet, I think the official title is the JM M c, and they can recommend that there’s a full ministerial meeting, you know, if, if prices get too outta hand either way. But I, I think right now, you know, given, given where the market is, I, I, I don’t really see, you know, OPEC taking drastic action. Of course, you know, if the, the market gets above or well above or well below their price bands, you know, I’m, I’m sure they, they’ll meet, but, you know, right now I think it’s steady as she goes.
Yeah. I do recall a, uh, customer of ours, Andy, uh, after an OPEC meeting where they, they actually gave a range. They were looking at, sold some, uh, some of those strangles around those prices and, um, didn’t work out too well, you know, <laugh>, I mean, what they’re always, they, they want a price, but you can’t always get to it. Right. We’ll see. We’ll, we’ll see how that works out.
Yeah, it’s, it’s, it’s difficult to manage the market, although, you know, they’re, they, they have increased. If you look at 2022, uh, in the first quarter, they, they averaged 28.4 million barrels a day, and they came out of it, you know, at 29.1 million barrels a day. So they did, they did net uh, increased production. And, uh, I, I think that was, uh, another factor certainly in, uh, tamping prices down.
So what about some non OPEC production? Uh, looks like everybody’s, uh, Brazil, Canada, u US gui all gonna be producing at record levels in Norway.
U usual, usual suspects, except for Guiana. Except
GUIs, the new one,
Right. Norway, you forgot to add, uh, Norway, we’re, we’re looking for, since Russia’s a net, you know, Russia’s also a non OPEC producer. We’re looking for about an increase in, in, um, non OPEC production of about 0.9 million million, let’s say. Let’s just round it up to a million barrels a day. Uh,
And that’s in, that’s including Russia, you’re saying?
That’s including Russia. Okay. Right. Yeah. I mean, if Russia, and, and as I said, we’re, we’re something like 0.5, 0.7 million barrels a day lower on Russian, obviously, y you know, getting back to opec, obviously if Russia keeps pumping out at 11 million barrels a day, uh, and doesn’t fall at all, you know, then OPEC is gonna have to do, so they, they will have to redo, reduce production. But I think, you know, if you look at the OPEC numbers, there are pretty aggressive on, um, you know, on where they think opec, uh, Russian production is gonna be. They, they’ve, as I think I mentioned, they’re, they’re looking at like, you know, down 900, uh, for 23. So that, you know, again, as you mentioned in the, you know, in the beginning, Jim, Russia, China, you know, <laugh>, those are,
Yeah, yeah. And with a high variance around what we say about future production and consumption.
So let’s get into refining looks like, uh, runs were down in December. I mean, there’s a lot of weather issues, uh, but overall refineries, they had some great cracks. Now, what, what’s the situation refiners are in now?
Well, the cracks have really rallied, uh, because, uh, at least in the, in, uh, us owing to the fact that these refineries have according, at least according to the, uh, eia, these refineries have not come back. And I guess according to the market too, so maybe one could say, yeah, those run numbers, which are lower than, than what we had expected, uh, for this week, has led, has led to a nice rally in the, in the cracks as has, uh, you know, the big builds in, uh, the big build in, in crude. So, you know, for, for right now, owing to the fact that they’re not, uh, that refineries are, are not up to where they should be for mid-January because of the freeze outs in, uh, in December, you know, margins, cracks are, are pretty good. And we are going into, we are going into turnarounds in, in February.
So, you know, short term, I think that the, you know, the, the refiners look like they’re gonna be in good shape. And as we go forward, uh, one thing that is really important, another really important factor is that is gonna be a lot of new refinery capacity on the market this year. Something like, I think it’s net over a million and a half barrels a day globally. And those plants presumably are going to be, uh, a lot more efficient than, uh, some of the plants that they’ll, they’ll be replacing, like here in the us Beaumont, Exxon Beaumont is, is adding about 270,000 barrels a day of capacity to their existing refinery. Uh, and that’s going to replace the Houston refinery, uh, owned by, uh, having a, I’m having a moment, but, uh, that Houston refinery is, is, um, certainly not, you know, you know, that’s an old refinery, right? And that’s what we’re gonna see globally, some of these big refineries replacing, you know, older refineries and I, and I think that, um, the second half for, for refineries may be a little more challenging than, uh, certainly then the, then the first half as these plants come on to, um, you know, come, come onto the market. And certainly where the economy is, is is another, uh, another key factor.
There’s a, there’s a story out, uh, I think it was Reuters put out about, um, uh, some analysis showing that they expect, uh, a heavy maintenance year this year. And, and, um, maybe, uh, by February we see, uh, almo almost one and a half million barrels of capacity offline. Right. Which be twice the five year average. Are you, is that kind of what you’re coming up with too, or? Yeah.
Yeah. I think first quarter, as I said, the first quarter, you know, should be good for refiners and into the, you know, maybe into the second quarter as well. But, you know, second half, even though we see an in increase in demand, we’re also gonna see an increase in, uh, refinery capacity to, to meet it. So, um, you know, it still should be good. I mean, I, I, I think it’ll still be historically pretty good for refiners, but nothing, nothing like last year,
Uh, comment on this, diesel cracks are doing better than gasoline cracks, therefore, refiners are gonna keep producing diesel, and they can only, this was, I think this was in the EIA analysis, um, therefore, uh, they’re gonna be producing a lot of gasoline with it that we don’t necessarily need. I hate to get in, get you into a heat to gas trade.
Oh my goodness. Come on,
<laugh>. But I mean, just on that factor alone, does that, does that make sense to you? Or is it like, is is decent?
Yeah, I, you know, it does, it does make sense. Again, some of the more advanced refineries can tweak it a a lot better than, than some of the older refineries. But yeah, in, in essence that that is the case. And, uh, yeah, we, we’ve already, we’re already at least on gasoline here in the us, you know, we’re, we’re in pretty good shape, uh, and demand is in terms of, uh, inventories and as we’ve been mentioning, every single podcast, I think, you know, us demand for gasoline has been, you know, really disappointing this year. Flat, lower, you know, next year. I think it could be, you know, I, I I think it’ll be lower.
Interesting. Um, Andy, in the Wall Street Journal, there was a story that, uh, mentioned 10% of all new cars in the world are our electric vehicles. And I’m just wondering if that’s influencing your, uh, demand numbers for, for gasoline these days. I know you, you were, you know, maybe three or four years ago, you were talking about how it’s still just a blip on the radar, but now seems like it’s getting more important. Is that, is that true?
Totally. Yeah. Yeah. Yeah. Uh, I think the, yeah, for years that we’ve been, you know, I’ve been an analyst forever, this Jim know, but
19, 19 78,
Yeah, well, 1980.
Oh, okay. The heat heating oil contract,
Right? Oh yeah. The heating wall contract 78. Yeah, right. It came upon the scene in 80. Where were we? Oh, gasoline. Yeah. Yeah. So we, we have been, you know, I had been poo-pooing the, the influence of, uh, EVs on gasoline demand, but now it’s, you know, it’s beginning to, it’s definitely emerging as, uh, you know, a more and more of a, of an important factor in the us you know, I, I think we’re, we’re still probably under a hundred thousand barrels a day of net losses because of, uh, the growth in, in ev globally. The I e a put losses of demand as well as, uh, efficiencies at 900,000 barrels a day. But maybe cuz globally is where the, the action is on, uh, ev, particularly in China, uh, US is gonna continue to grow. Last year, I think, uh, the journal, I think the number on EV sales were in the US were 800,000 or 6%. I think in China. It’s something like, was it 20% Jim? I mean, it was,
You know, it’s markedly higher in China and Europe than, than it is here, but it’s gonna continue to grow here. So Yeah, I mean there, that’s a, that’s if you put, if it, if 900 is right, you know that that’s a, that’s a big number. 900,000, you know, that’s, yeah. You know, it’s only 1% now, but it’s growing.
Yeah. If the growth is exponential, right. Um, it’s gonna be a, a bigger part and, and I don’t know where they count hybrids is is, is that counted as an EV or a Yeah, or they just throw out into
Yeah, yeah, yeah. The journal numbers, it was a, uh, I think it was an e I think it was an EV
Or the, or the catchall category of efficiency. Yeah. But the it, la last year’s kind of 2 20, 22 was kind of a, you know, we had those high gasoline prices so that, that was affecting demand as well. Right. Interest, you know, I kind of thought, you know, how is this EV thing gonna play out? And the more EVs you get, the lower gas prices go to everything else equal and then lower gas prices go, the more value, maybe a used car has <laugh> that uses, uh, you know, it’s gonna be interesting to see how that, uh,
Yeah. I mean, the tough calculation is, alright, does that ev replace a, um, internal combustion engine? Is that, you know, is that engine retired or is it gonna con, you know, is it being resold and used by somebody else? So that’s why these, you know, the net numbers may, you know, the gr there’s the gross numbers, but what, what are the net numbers? Right? You know, they may be, they may be quite a bit, quite a bit lower, but, you know, it’s definitely, as I, as I mentioned, we’re gonna be talking about this a lot in the, in obviously in the next, uh, you know, in our podcast coming up.
Yeah. So lemme lemme just mention a couple things about options, Andy, before we, uh, get off and that, um, you know, I mentioned earlier we had seen a lot of bullish plays, uh, coming into 2022 and then the war, uh, helped them out probably, you know, got higher prices sooner than people thought. And, um, if I looked at the, I looked at the open interest numbers for, for, especially for WT WTI and brands, but, um, mainly in wti, the, the top six of the top 10 of the calls were in February, which went off the board, uh, on Tuesday. But they were all these, uh, $1 strike call spreads. So, so we had the 1 0 4 1 oh fives, one nineteens one 20 s, 1 14, 1 15, and they had about 35 to 45,000, uh, lots of open interest on, on each leg. So that, that’s a, those are big numbers and those are, you know, done in, in big chunks, you know, 35,000 at a clip.
Um, and now those are gone, uh, but we’re still left with some, you know, monster like the, the one 19 and 1 21 calls in June have over 70,000, and the June one 20 has about 36,000. So those also are part of, that’s a, a one strike call spread, maybe a two strike, uh, a $2 wide strike call spread and some just outright call buying in the more optimistic, uh, times in Brent, the number one, uh, call option is, uh, the, the June one 50 calls got 75,000. So that, so all those were put on in, you know, kind of the, the height of the, uh, of the bullishness. And, uh, now we, what, what we’re seeing coming out of into this new year is more call yesterday was a good example where we had, uh, twice as many calls trade as puts, however, there was twice as many puts of new open interest than calls.
So it’s kind of like a churning going on on the call side and, um, new, new positions being put on in the put side. The other thing I’d mention is, um, volatility’s down to around, uh, 42% in the front month, a little bit of, um, contango in the market. Not, not much, but March is lower than until you get out to June. I think June and July are are the peak and fall. The, the interesting thing is that if you go back, I guess from October, the historical volatility, a 20 day historical volatility has, has been in the thirties, you know, pretty much the lower thirties since October. Implied volatility was, you know, in the high forties and high fifties, early in October. And, and now it’s down to 42%. So, so the actual market vial, you know, I mentioned March was between 70 and 90 since, since October has the, the actual market vials come down or is, is low, but there’s still a, a premium, uh, nine to 10 points in inly volatility. So, so the market is saying, you know, there’s nothing going on now, but you know what, there’s some, there’s something out there that could happen. And again, gets back to that uncertainty that we, we’ve been talking about for the whole podcast.
Yeah, I, I think it, it’s interesting that the, the put volumes have been the, the put open interest has, has been growing. You think that’s producers,
Uh, you know, it’s, the problem is it’s all spread out. It’s hard to tell, you know, it’s, I guess you’re not seeing big chunks of anything go. It’s like, you know, two, 3000, occasionally a 5,000 lot thing will go. But yeah, it’s, it could be producers. Um, we, we talked about this where when the markets were up and even after they come off some, the thing that was, if, if you look at the market as let, let’s say you think the future’s market is moving to a, a price where you had a 50 50 chance that’s, that’s, you know, theoretical, but the, the part and the option curve or the, the option, uh, market that was missing was out of the money put buying. So there was no, nobody was doing that. And um, it’s, it seems to be a little, maybe, maybe, uh, some of that coming in as well.
It, people looking at these economic numbers and saying, you know what, this is not gonna sustain, you know, food prices and or they’re looking at the EIA numbers. We’re gonna have builds in the second half of the year. Maybe. Maybe that brings in some, uh, with the economy weak in the, in the first half of the year. So, uh, yeah, it’s, uh, maybe that’s what it’s all about. And you know, the, you don’t have a buyer without a seller, so there’s, there’s obviously some willing sellers out there. It’s not all market makers. Yeah. So it’s, uh, it’s a tough, again, volumes aren’t wild. They’re not great, but they’re, um, you know, people are back to trading again. And, and again, they could, the, the call, there’s so much call open interest that now that’s, that’s churning, people are getting out rolling all kinds of things so that, that generates its own, uh, volume there. But, um, well, I, I, yeah, go ahead. Sorry.
No, I, I was gonna say that it, it’s great that people are back trading, uh, a little bit more. Certainly there’s been, you know, one bank in particular that’s really been, uh, you know, ha has been banging the, the bullish drum pretty, pretty loudly. Of course, they were ba banging that drum in the fourth quarter too. You know, <laugh>, that didn’t quite work out. But, you know, may, maybe they’re getting a little bit more interest in the, in the more the banks in general. Maybe they’re getting a little more interest in in the commodity markets.
Yeah. I I think they missed the, uh, you know, covid lockdown in China and uh, and obviously the Russian oil that’s been able to maintain on the marketplace and, uh, you know, maybe, maybe a little of the economy, I don’t know. But it’s, uh, it’s, you, you, um, I don’t know. You, you, you can’t, this is a market. You, you, I guess you can always remain bullish that you, but you’re gonna be right at some point.
Yeah. I I think they also were very, very arrogant about the effect of the spr on, on the markets, you know, saying that it would’ve no effect. Well, it had a, you know, it had a big
Effect Yeah. That those barrels just kept coming.
They just kept coming,
Kept getting exported.
Yeah. They kept getting exported and that, you know, they contributed to at least building some, uh, you know, well needed, well needed inventories. I mean, inventories are still, you know, they’re still low. They, they’ve, they’ve rebuilt some, but you know, relative to five year averages, they’re, they’re, they’re still on the low side. So that’s yet another, you know, that’s another bullish factor. Uh, you know, that gives some support to the, some support to the bulls. I mean, there’s a lot of things that the bulls can, can work out, you know, to, to say the market could go back to a hundred or it could go anywhere, obviously <laugh>.
Yeah. As, as we, as you know, since following this thing since 1980,
Yeah. In, uh, me in 1986. What else, Andy? What did we miss? We’re probably missing a lot of
Stuff cause it’s, yeah, we missed a lot of stuff, but I think we, I think we’ve covered, you know, some, some of the, some of the main points. The one thing, one thing that’s sort that’s pretty interesting is that, and I think this is a reflection of the consumer wanting to travel, uh, globally, jet jet fuel prices here in the US are through the roof in New York Harbor. They, they were trading 70 cents over the screen after being in contango for the fourth quarter. So I think, you know, the, there’s one indication that, uh, jet fuel demand should be pretty strong. And that’s, that’s one of the things, if you want China demand to be, uh, closer to 900,000 than my 600,000 or 500, you know, 500 to 600,000, it’s gonna be, it’s gonna have to come from jet fuel demand. So that’s something to, that’s something to watch. And obviously that’s good for refiners that, uh, that jet fuel has been, that has, that’s been that strong.
Yeah. And so put putting it all together, ask you to give me what, what, what is, what’s your, uh, probability of prices going forward? What do you think?
Well, I think that I, I’m not right now based on, you know, my balances and my nu you know, my numbers and some of the other numbers as, as well, I, I, I’m having a hard time seeing the market really take off, you know, towards, uh, the C W T I taking off, you know, towards above 90, really, uh, you know, I really, so I, to me, something would have to happen for it to get, uh, anywhere near, uh, a hundred dollars. So, you know, last, last podcast we, we spoke about a 75, 85 range market got down lower, you know, it did get down to 70, uh, and the 82, I think is the recent high 82 or, or 83. But you know what, Jim, I, I’m pretty, I’m still pretty good at that 75, 85, at least, at least, you know, at least going forward, may maybe expanded a little, uh, maybe you’re 70, 90 range is the, you know, is the ultimate one, the play. But, you know, to me, 75, 85 is, you know, I think I’m still gonna, still going stay there and, and obviously we’ll, we’ll start learning about some of the uncertainties that we, you know, I think we, we both outlined in the, in this podcast.
Very good. We’ll leave it there. Leave it right there. Until next month, Andy.
Shall, until next month.
Actually, I’ll be talking to you later today.
Right. Uh, as far as, yep. If you, if you wanna get ahold of, uh, of me, try it, try me at firstname.lastname@example.org. And, uh, as Jim mentioned, our, our website is, uh, www.commodity research group.com. And Jim, yeah, you can find him on LinkedIn. Me too.
That’s best to find me is on LinkedIn. Great. Thanks Andy.