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 afternoon.
This is Jim Coburn, Commodity Research Group. I’m with Andy LeBow, also of Commodity Research Group, and we’re here to talk about energy markets.
To learn more about us, you can check out our website at Commodity Research Group comm where we post our podcasts. We’d like to thank our friends at EKT Interactive Oil and Gas training for hosting this podcast. Check out their newsletters, podcasts and learning modules at www.ektinteractive.com.
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’s January 18th and it’s just after noon.
Andy. So our first podcast of the year. So why don’t we, uh, talk about the big three monthly oil reports out of the US, EIA, the IEA and OPEC.
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And um, I know you uh, go over these really closely being a barrel counter yourself. What sticks out to you of, of the their first releases for the year. All right. Well let’s start with OPEC. I do want to add that there’s another major. Report that I wanted to focus on. And that’s the little one of CRG, the big four plus one, which I think, you know, I actually have more confidence in our own balances than, uh, some of the stuff that, uh, was released over the last, over the last week or so. But I’ll start with, uh, I’ll start with before you go on, I, I just have to say, since, um, I would say 2020 with the pandemic, you’ve nailed the demand side of this relative to these other guys and, you know, year in, year out. So I think, you know, you’re being humble, calling yourself the little one where you, you you can go toe to toe with these guys. Uh, well, that yeah, we we try we we definitely try. It’s a difficult it’s a difficult exercise. And, um, even though I’m now about to bash the OPEC numbers. Yes. Um, they, you know, they, they still try their best. Oh, yeah. Um. Oh yeah. They’re really coming out with these forecasts. Um, but, you know, it’s so hard to believe what, uh, the numbers coming out of OPEC on their, on their monthly report. Um, they had a huge increase in demand for 2023, up 2.5 million barrels a day. And then they see another 2.2 million barrels a day increase for, uh, 2024. And critically, they if you look at their numbers for third quarter, they’ve, they’ve got a third quarter, 23, they have a draw of a million barrels a day. And then it fourth quarter of 2023, they had a 1.9 million barrels a day draw, which I think we could safely say was complete wrong because the all you have to do is look at the price.
If we had a draw of almost 2 million barrels a day in the fourth quarter and prices would be much higher, I mean, so the numbers from OPEC are hopeful, fanciful, whatever you like, uh, to, to call it. But I think, you know, they were they got it wrong for last year and looking ahead for next year. I also think they have it wrong because they have a huge increase in demand again, which would imply a higher global GDP, a return of, uh, distillate, of stronger distillate demand, uh, gasoline demand, etc., etc. and where they have the demand growth, where they have the demand growth is in Latin America, the Middle East, some in North America, not so much in the, in the OECD and of course, in China and uh, and India. And they’ve got draws for all four quarters, Jim. They’ve got a million the, the million barrels a day drawn first, second, third and fourth quarter, which would mean that OPEC, the uh, producer cartel Opec+, could easily unwind their current production cuts with no problem. Uh, if again, if you believe these OPEC numbers, you know, you have to be really bullish on the market. Well, Andy, these numbers would imply. You know, they they’d imply $90 crude pretty easily. Well, uh, if we go back to 2023, they had these, um, bullish estimates in their reports and OPEC plus the the entity went the other way. I mean, they they kind of didn’t listen to this report and they cut back. Production and, um, the market. I mean, they they kind of like. Were the only ones that saw maybe a softening demand or a demand, numbers that weren’t going to come to fruition. I mean, the market. Yeah. I mean, had they not cut back, we’d be a lot lower. We’d be like, yeah, we’d be a lot lower.
And so they, they, the producers themselves, you know, that they got it right. Or, you know, they expected that with these, um, continuing cutbacks in the fourth quarter that, you know, they do better on the price because demand would be higher than expected. But you’re right. They knew that they had to continue the, the, uh, cutbacks and then add more for the first quarter of 24. And that’s what you you think they were going to do that they’re going to start leaking out some barrels over the first. I think first of all, they have to cut back because the oh it’s they can’t they can’t leak out before they even do the, uh, to the cutbacks. That’s. Yes. You know, if you look at the last OPEC meeting, they got pledges from a number of the Saudis, got pledges from a number of producers, including Iraq, the UAE, Kuwait, Russia, uh, and some of the other, uh, non of some of the other OPEC plus producers. And you know, so far you have to say that there’s no evidence that, that the other producers are cutting back. Now. It’s it’s still early. But you know we’re looking at February and March programs and you know I don’t see or I don’t think the market sees that Iraq UAE are cutting back significantly. I mean, maybe Kuwait cuts back some um, they did get some. They did get a bit of a break. Call it a break. I mean, Libby is having, you know, Libby declared force majeure on some production because of protests. So, um, you know, that there is there is going to be a production decline, but I think the market is, you know, looking at. Well, you know whether or not we’re going to see these cutbacks before we even get the leaks, right? Good point. And I guess we still don’t have, uh, some Kurdish barrels on the market from.
Right. That’s that’s 400,000 barrels a day of Kurdish crude, which should be under the Iraq numbers. And Iraq is supposed to be going down, not up. So. You know, and it’s probably, you know, I’d have to say that that’s probably one of the reasons why the, you know, the market has really had trouble getting out of its own way. You know, the they haven’t really they haven’t seen the cutbacks in Russia. You know, Russia pledged an additional two. Well. Gross of of 500, but an additional, say 200, and they actually may be cutting back. Not so much of the of their own accord. But you know, they’ve, they’ve had some trouble selling into, uh, India on, uh, on pricing and they’ve also had some trouble on, uh, refinery runs. There’s a refinery issues in Russia. So it is possible that that Russia’s cutting back. You know and that that that’s certainly a always a question mark for the market where the you know, where Russian production is. Well, I just wanted to say that since Angola has left the group, are they calling it OPEC plus minus now? Yeah. Uh, I don’t think that was really good. I don’t think the loss of Angola is, um. You know, Angola’s production has been going down steadily right, for a decade. Right? Uh, they’re pretty much, you know, they’re pretty much at 1.1 billion barrels a day, give or take. And I don’t think that, you know, they’re hoping to go up, but, uh, you know, I don’t see it, actually. But. Yeah. So Angola’s out. Um, just, just quickly going through the other. The IEA. The IEA also had a big demand number for um last year for 2023. They were like two 2 million barrels a day. And they think in 2024 it’s going to be 1.2 million barrels a day. They just increase the. I guess that report came out. Came out today.
And finally the EPA, who I think. Did the best that of anybody, right last year. Because they saw, you know, they basically had inventories building in the fourth quarter. So, you know, everybody else had these had these big drawers and um, they had inventories up, you know, something like a half a million barrels a day for, uh, for fourth quarter. And they too had demand. They had demand up one nine for last year. And now they’re looking for another one three increase for um for this year. They have interesting they, they basically have um stocks balanced for the whole year. They have a slight they have a slight draw which they wrote about in their, you know, in a report last week. They have a slight draw. One of the banks that, uh, that we follow has a slight build. Uh, um. CRG, the CRG numbers last year. We had a slight draw for the for the year and we thought fourth quarter drew a little bit you know drew like 400,000. But you know I think I kept having to decrease the the draw Jim kept having to like you know starting starting it like let’s say I thought it was going to be a draw of 1.2 to start. Right. Uh, you know, then I got whittled down to like 0.3 or 0.4. It may have ended up being unchanged or build for fourth quarter. Wow. Yeah. It’s a big, big mess. Yeah, it was a bit. It was a big mess. And um, for this year, coming up for 24, we see an increase of, uh, 3 million barrels a day. And I also have a slight draw for the for the whole year. So I have to say the market right now does look pretty balanced. For the for the rest of the you know, it does look balanced. I know. Well, you know, I got a little here in that, but you look balanced as a, uh, an options guy.
You know, I saw the IRS projection of, uh, Brant prices for 82 and 20, 24 and 79 and 2025. And I think I think 2023, they averaged 82. And I’m thinking, uh, you know, you know, sell, sell volatility because we’re not going anywhere. But on the other hand, um, I put a post on, uh, LinkedIn and I love I love these the EIA puts out some great stuff. So I’m not I’m not trying to, you know, give them a hard time. This is their very difficult thing what they’re doing. But when you see a like a straight line forecast of price for two years, you know, kind of that’s when I’ll get an email from a, you know, an analyst every now and then saying, uh, I want your projection for oil for this year. And I, you know, I said, I who the hell knows, right? So I’ll take the current price and give it to them. And and so to me, I was chuckling because they did a, they showed a price chart, um, with their projections. So it’s a straight line and, and it just looks, um, looks like they’re throwing up their arms and saying, you know, we have no idea. We have no idea either. So which, you know, people have been for the last few years, if I can throw a little, uh, some vowel numbers in here, I do this, um, you know, I have, I have, uh, implied vol data back to beginning of options trading in the 86, as many of you know. And, um, at the end of the year, I, I do a long term average and for many years it’s been around 33%. But after, uh, you know, the crazy year 2020 and, and, uh, 2022, the, the number has bumped up to 35. So it takes a, it takes a lot of volatility to bump up this many year long term average up to vol point. So we’re coming off of you know for two of the last four are probably the highest values of all time.
And to see this uh straight line forecast, you kind of like a little context like okay, what’s more important is that the price projection or is it the price path. Because we have we had some people that were, uh, talking about. A rally in futures prices. And then within a week, you know, China went into lockdown. I think the prices dropped by 20 bucks. But then further on, we we, uh, they rallied and they I think the war was around the corner. And so the price all those, all those price projections of higher prices were correct. But we dropped 20 bucks first. I’d really like to know the path that we’re going to go through as much as I’d like to or, uh, see the final result, but that’s just me because I’m a, you know, crazy option guy. Well, you also have to look. Yeah. Talk about the path. I mean yeah, the the prices ended up at 83 and 78 last year for uh WTI. Okay. Um, Andy, we, uh, we had a little, uh, snafu with the internet, so let’s let’s continue. You were. You were talking about WTI prices, and, um, I believe you’re getting into the price ranges. Yeah. I was, uh, talking about, you know, you you were talking about the the path. And, um, I was talking about the range from, uh, last year, WTI was, uh, the lowest around 63. Uh, the high was 95. So we had a $30 range. Uh, uh, you know, one could say, one could say with some confidence that they think in 2024 the range is going to be narrower than that. Uh, uh, you know, after studying this market for decades, I wouldn’t bet on it. Yeah. It’s something always happens. Uh, right. Something always happens. You know what’s interesting? Right now, we have, um, stuff going on in the Middle East. And, you know, China demand all the things you talked about going on.
Uh, typical, uh, oil market, I think. But, um, the, the trades that I don’t see other than for hedging is like the, the speculative put buying. So I, you know, say after, uh. Below, say $60, something like that. We’re not. We have some open interest on those strikes, but that’s from a long time ago. It was most likely oil hedging. But we, um, I would say that’s something that. The market’s not prepared for. You seem to be prepared for lots of upside. Price going on. I’d agree with you know it’s hard to be super bearish here. The under. $60 with, um, you know, some of the developments, uh, particularly out of the out of the Middle East, I guess that the hedges don’t need don’t feel like they need the, uh, the protection for, uh, a big downside move. Um, I one thing that could certainly change that, of course, is if the Saudis decide that, um, you know, that they want to go, they want to increase production, full bore, you know, this flood, flood the market in the in the second half. But, you know. I don’t see that. I mean, I just it’s hard to make it make a case for that. You know, they tried that in 2020 and it didn’t, didn’t really work out so well for them. Right. Um, you know, and they’ve tried it a number of times over the, over the past, you know, during our careers. And it doesn’t it, you know, it never seems to work out well, but I think that would be the, you know, that that would be the impetus for, uh, a real bare move, um, coupled with, you know, let’s say the, you know, the any type of recession. But right now, um, like you said, Jim, it doesn’t look like that flow for for taking downside risk protection is in the market. Yeah. I mean, the other the other, um, story that seems to have gone away and maybe it’s starting to come back again is the lack of investment in oil.
Maybe, maybe the, um, you know, the increase in US production this year has calmed that down. But, you know, coming into this year, you know, there’s always this talk that in the future there’s not enough money being invested in new oil wells, new new oil production. And, um, have you been hearing any of that for, say, 2025 and. In the out years, this is going to be the lack of capital. Um, not not so much as it was over the past, you know, the past few years. I mean, certainly the, um, you know, there’s been consolidation here, here in the, uh, here in the US and uh, the been some, you know, great development. Certainly Guyana’s is a, uh, incredible story. And the growth in Brazil, I think going and, you know, the biggest story of 2023. Not the biggest story, but one of the big stories in 2023, which you alluded to, Jim, was the success of, uh, us producers. You know, we really the US killed it, I believe. Uh, it was unbelievable. Yeah. Like nobody had that, I mean, even. I was gonna say it’s like another revolution within a revolution. Yeah. I think for, for, um, a number of reasons. Certainly, you know, the high prices from, uh, 2022 did spur investment. And, um, you know, we saw the rig count go. We saw the recount go up as, uh, as prices rally. Now the rig count is off. So the, the US, uh, the EIA is talking about an increase of only a couple hundred thousand barrels a day, and they’re actually talking about no increase from where we are right now. I think the last weekly was 13 three. And, you know, I think that’s where they’re at for next year. Right. That at 13.3 million barrels a day. Yeah, I think, I think I think it’s going to be higher than that I can’t imagine. I think in their reports they’re talking about the recounts are going to catch up to the production numbers so and flatten this growth out.
But yeah, it’d be it’s it’s going to be something interesting to watch. You had mentioned we’re going to lose some production from this storm. And so we’re going to so we’re going to have to recover that first. That’s going to be this month right in in North Dakota. North Dakota from North Dakota. It looks like it’s 500,000 barrels a day. Uh, so that’s a significant. Yeah, it’s a significant number. I think that, you know, that that should that should come back pretty quickly. Mhm. Um, you know, it’s easier to get those, those, uh, wells up and it’s, you know, it’s going to warm up. So I think that’s going to come back quickly. What’s not going to come back quickly as we’ve, you know, as we’ve learned over these years is the refinery capacity that got taken out. You know, there was a report that a million and a half barrels of refinery capacity went down because of the cold weather and the storm in the, in the Texas Gulf. And in the same report, they were saying, oh, that’s going to come back, you know, no problem. Uh, that that rarely happens. You know, there’s usually some there’s usually problems, right. Um, you know, you’d like to think that the refiners are better prepared, and they probably are. Uh, because just a couple of years ago, they lost capacity for a significant amount of time. But I can’t believe that all that capacity is going to is just going to come back. You know, and, you know, the next week or two and then we go into turnaround. So you know, it’s possible. Certainly we’re seeing the cracks of increased some I mean gasoline cracks have been increasing for for a while here. Uh, which is hard to hard to fathom actually. Why why. But they, they have been um and diesel diesel cracks went up over $41.
You know, the New York, uh, WTI crack went up over 41 now has, has set back. But those are pretty good numbers. And even in the gasoline cracks you know they’re not. If you go down the curve they’re you know they’re not. Do not what they wore last year, but they’re not bad. Well, I think you’re going to get a little bump in gasoline demand from the storm as, uh, you know, a lot of these EVs are failing miserably, but that’s. Oh, man, that’s a lot of. Yeah, short term, uh, a lot of disillusioned EV owners, you know, in, uh, the upper Midwest. Trying to figure out how they could keep their their battery. You know, recharging their, uh, recharging their battery and that, you know, that that’s that’s part of it, uh, owning an EV. And, um, you know, it’s interesting that, uh, Hertz. Decided to sell 20,000 of their, uh, electric vehicles in their fleet and replace them with gasoline cars. Um, saying that, you know, one, that consumer demand wasn’t there and two, it was costly to, to fix them. So they may not be may not be a straight line up. It may. No. It’s you know, I thought it would be zigzag because of, uh, the price of gasoline. I thought once you’ve made an inroad in, you know, EVs, the gasoline demand would plummet, prices would plummet. And then you’d say, well, I got to buy, uh, a gas driven car, but, um, it’s not working out that way. I think it was the IEA said that, uh, 18% of the sales in 2023, uh, light, light duty vehicles in the US, EV EVs and hybrids are up to 18%. And in China, it’s 33%. And they’re thinking that it that trend continues and puts pressure on gas demand next year. And uh, my question is I know you starting to put the EV you’re saying I think you said before that you’re starting to see, uh, the effect of EV, uh, sales on gasoline. Gasoline demand.
Totally. Totally. Yeah, yeah, yeah, yeah, it looks like we’ve peaked in on gasoline demand in 20 from 2016, 17, 18 and 19, US gasoline demand was pretty solid at, uh, like 9.3 million barrels a day. And last year I I’m right. I think it was I think it was 8.8, uh, million barrels a day, something like that. Um, so we certainly we’ve lost, you know, we’ve lost half a million barrels a day. And some of that, uh, has been, uh, some of that CV demand and that that is going to continue to grow. Right? You know, there’s no question about it. There’s no question about that. So I think, you know, you can see that one I feel pretty certain about that. US gasoline demand has has indeed peaked. There are other there are other factors. But um, you know, I think I think we’re going to be hard pressed to, to get an annual demand of over 9 million barrels a day. Again, just want to throw in some options stuff here. You know, we talked about, uh, do we talk about the Red sea? You know, we know we have it. Well, you want to just, uh, sort of recap what’s what you’re hearing, what you’re seeing, what’s being reported. The, um, well, as I think most of our listeners know, the hoodies have been, uh, attacking shipping in the, in the, in the Red sea. And the Red sea, of course, is a shortcut between, uh, Asia and Europe. So 8 million barrels a day. Go through the, uh, go through the Red sea, both north and north and south. And certainly, uh, a number of, uh, shippers are now avoiding the Red sea and instead going around, uh, going around Africa. It’s not a loss of 8 million barrels a day, however. Um, because part of the part of the traffic is this Russian traffic as well as, uh, Middle Eastern production going going through there.
So what what’s happened, however, is it’s more it’s more of a dislocation. Um, and again, we haven’t lost any production at all. So what we’re seeing is some dislocation and the journey takes probably ten to to 14 days longer. Going around, uh, going around Africa. What’s that? What has that led to? Well, it’s led to when you see dislocation like that, you know, usually you you see the structure rally. And indeed the physical market is now above the first futures. Brant is is already heavily backward, dated at 50 to $0.60 over Oman crude to the Oman futures as well or uh backward date in the physical is over that. So the market is really reacting as one would think. You’d think however the outright price would rally a little more than it has. But we’re certainly seeing some, uh, some big moves on, uh, structure. You know, generally that’s bullish. You again, you think you think the price of oil would move up. But, uh, you know, we for the time being, we can’t get out of our own way even in WTI. You know, the loss of the of Bakken has moved uh, WTI from, from contango to, uh, to backward dated. So, you know, I think the market is reacting as, as, as it should. Yes. And I have to say the, um, the option market has reacted, as you might expect, and also kind of that subdued move where volatility was, um, you know, in, in the last, uh, I don’t know, month say the low has been 32% and now it’s at 36%, which is the. Which is the high in the last. Well so we. So Val’s moved up a little bit. Not much. And as I mentioned the long term average is 35, so that’s not that much. The skew also moved from um minus four. That would be uh uh 25 Delta. But compared to a 25 delta call on the I think I used, uh, March options and, um, that it would, it was minus four uh, last week to the put and that’s kind of normal.
And now it’s, uh, -1.5. So the skew went, you know, from. From a bearish skew to a less bearish looking skew, which was which was also what you would expect. So but nothing you know in the the volume did pick up beginning of the year. Volume tends to pick up also with this stuff going on. Um, but you just haven’t seen, you know, gigantic plays going on. The paper flows spread out across the board. The, the big open interest in calls and WTI continue to be the, the meh 76.5 77 calls. And that was like a when those giant 55 50,000 55,000 call spreads were being done. You know year year and a half ago that’s still on. Uh, maybe maybe that was done more recently in the summertime. But other than that, there’s just not a lot of, you know, new. Option flow, causing a strike. To to look, uh. Uh, big. You know, there’s no no big, big strikes out there. For example, the the big put in was 23,000 lots. That’s the March 60th put. And that pretty much was done a while ago. Was built up a while ago. And if I look at, uh, brant options, the the big put is the D 60 put 31,000. So that that also is done a while ago and then calls the March 1st ten call was 56,000. So you know it’s again my the volume has picked up but it’s not it’s not react. It’s not overreacting to what’s going on. Put it that way. Um, yeah. That’s that’s, you know, you look at the situation now, right? You would think that somebody would be taking taking a shot, I guess is still the market doesn’t expect that there’s going to be any, uh, you know, any production loss and that while there’s a chance, certainly a chance that this Middle East war, um, expands, you know, for now, the market, I think, is relatively complacent.
You know, there’s always, you know, the one thing that I think the market’s been fearing for. Probably, I don’t know, since the 1950s or 1960s would be the closure of the Straits of Hormuz. Now they are. There goes 20 million barrels a day of, uh, crude and refined products through. That’s the main, you know, through the, through the Persian Gulf. So, um, that that would be, you know, that would be catastrophic. It hasn’t happened yet, and hopefully it never happens. But, um, you know, that that’s that’s probably the biggest, the biggest fear right now. Yeah. And I don’t see I mean, the US putting sanctions on Iran in an election year just doesn’t I mean, I, I know that’s kind of. Cold that I don’t see that happening either. I don’t see yeah, I don’t see it happening. Right. And and gasoline prices are certainly, you know, come down significantly. They’re the last I looked the average US price was 308. You know that’s down from the summer high of almost $4. So, um, Andy, after, uh, all this, we covered a lot of ground here, and I’ve. I’ve was a little snarky with the EA’s price projections and the, the IEA talking about a comfortably balanced oil market and. Give me some price ranges. You know, going out a couple of months. What do you. What do you see? Well, it does look it. Yeah I mean, it does it it does look balanced at least on at least on paper. Um, global inventories are a little on the on the low side. Um, if you look at us, total inventories here are actually there date, about a half day supply there about normal total inventories. Recruiter’s accrued is a little on the, uh, a little on the low side. But you know, I’d say globally, victory’s slightly low. Uh, but nothing, you know, untoward.
You know, my my view is, is more bullish than, than bearish. You know, if I look at my. If I look at my own balances, you know, I do see a decent draw in this quarter and I do see demand increasing in the in the second half. So, you know, I do like the market to to move higher. Can it get to? Yeah, I think. I think it’s got a chance to get to, uh, to get to 80. 90 is going to have to be better OPEC discipline and, um, you know, a much stronger economy, stronger and stronger demand, which is is certainly possible. And on the downside, as I said, I right now it’s hard to trace something below 60. You know, could it get below 70. Yeah of course it could. You know that that’s. No. Yeah definitely. Right. Yes. I don’t you know it’s I’ll, you know I, I think those are the, those are kind of the numbers that I’m working with right now. And uh, yeah, it does look like it’s going to be a narrower range than last year. But you know, it’s only January. This is so, you know, we’ve got 11 months ahead of us of, you know, who who knows what’s going to happen. And as you and I always say, it’s the thing you’re not looking at. Yeah. Oh that’s right. Yes. That happens. Right. It’s a place where you had no you know, you weren’t even you weren’t even expecting anything. So, uh, you know, something something happens, you know, whether it’s infrastructure or, you know, geopolitical. Yeah. Recession, you know, or. What? Um. What, uh, out of the things you follow. Well, can you rank them as what you’re. I mean, you’re looking at everything, but would OPEC policy be the most you know, these are these are the desert island, uh, fundamental pieces of information that you’d like to see. Would OPEC policy, you know, the you want to see the results of the next meeting, would that be number one?
You know, China demand you US oil production. How would you rate it would be I think it would be Saudi policy as usual. You know Saudi slash OPEC policy. You know because the Saudis really hold the key as to, you know, how they’re going to unwind their price cuts if they’re going to unwind their price cuts. So I put Saudi number number one and let’s you know, obviously geopolitical. Something could happen. We know. We know that, right? So put that aside on a on a fundamental basis. Yeah. I think that, um, Saudi policy would be would be number one. Number two is probably, you know, there’s so many non-oil traders in our markets now that, you know, I hate to I really hate saying this, but, you know, fed policy is going to be really important. Right. Um, on on flow. Not that I really like to rank that all that high, but, you know, it certainly does have it certainly does have the flow behind it. Um, and, you know, we’ll see how new refinery capacity comes in. There’s a giant refinery opening up in Nigeria. Um, so, you know, it’s I think it’s 650,000 barrels a day. It’s it’s humongous and it’s starting up, and this new refinery capacity in. China. That’s not much of China, but in the Middle East. But, um, you know, it’s certainly will you know, I’d rank the new refinery capacity up there and Chinese demand, of course. And us, you know, how we do. The US does. The US oil production. Yeah. US oil production. Yeah. I thought, uh, us plus the the usual gang. Canada, Brazil, Guyana as a group to see. Right. We’ll see what what they do this year after an amazing year in 2023. Your financial comments. Uh, I would just say, you know, whenever I see an analyst and I, and I posted this on LinkedIn, so I know I’m beating a dead horse here, but whenever I see an analyst use the dollar as a reason for oil movement, I just check on the CME has a, uh, correlation table.
And, um, I looked at it before we got on in the 30 day correlation for oil with, with currencies. And they, they look at the euro. You could look at a bunch of them. But I have the euro that uh, the Japanese yen, it’s uh rounded to zero. If you look at the correlation with short term long term interest rates, it’s rounded to zero. And um, if you look at the correlation with the S&P it’s rounded to zero. So um, that’s you know that’s that would be without a lag or leads. So um, I kind of. Don’t look at that as much as, uh, as a, a driver of oil markets. And as I always say, if you have a view on a dollar. Trade the dollar. Um, yeah. You know, well, I’d agree, uh, for, for I guess what I’m mentioning is just, you know, the these flows that come in the funds. Yeah. Yep. Yep. And those the CFTC, CFTC numbers. We we we need to remember that their as of Tuesday they come out on Friday and I, I just don’t understand why in in the year of 2024 you can’t get a real you know release it on Saturday and get Friday’s numbers. You know it just doesn’t doesn’t make sense to have uh, Wednesday, Thursday, Friday of trading which a lot can happen and then release, you know, numbers of what what the funds and the you know that the, the big specs are doing as of three days ago. But that’s just me. Um.
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Anything else Andy you want to talk about?
I think we I think we covered a lot. We covered a lot of ground.
Okay. Um, some technical issues, but I think we got. We got through it. We got through it, and we’ll be back next month for the follow up.
You can find me on LinkedIn. First of all, that’s the best way to get me. Yeah. You could get a hold of me.
Uh, first of all, our website, www.commodityresearchgroup.com, and I am alebow at commodity research group.com.
Great. Thanks, Andy.
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