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 with Andy Lebow, also of Commodity Research Group, and we’re here to talk about energy markets.
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Today’s October 14th, Andy Lebow. Are you there?
I’m glad we’re able to, uh, to do this podcast. We have, we have so much to talk about.
We always say that, but it’s really true this time.
This time it’s true.
And he just got us a T it up here. Uh, October 4th, we had the OPEC meeting didn’t seem like a big event, but the market rallied. Um, just, you want to talk about what, uh, what happens and yeah,
Uh, OPEC prior to the meeting, some of the delegates floated a trial balloon that, uh, said they were going to increase production by double, uh, the amount that they had already told the market they were increasing, uh, which would be their, their plan was to increase 400 a month. And all of a sudden they put out this trial balloon that they were going to increase 800,000 barrels a day a month, or, and it was, it was unclear. But, uh, as the meeting went on, that trial balloon got, got shot down and, uh, they only increased by 400,000 barrels a day, or in other words, they, uh, they stuck to their plan and, uh, the, the plan continues to work for them. At least the next day, the market rally sharply, uh, relieved that it wasn’t going to be an 800 a day increase and the market has basically been going up. So since that day, um, yeah, it irregularly, uh, I think within OPEC, um, as much as they say that they are managing the market and keeping things calm, obviously with prices where they are here, uh, which as we speak is, uh, $81 for a WTI and 84 for bread. You know, the, the they’re more than happy to take those revenues right now, Jim,
They’re making their budgets.
They’re more than making their budgets. So I don’t think of them had, uh, you know, had this number factored into their, into their budget. So, you know, th this is all bonus. This is all bonus for them. And, uh, I think for now they weren’t, they weren’t ready to, um, you know, to rock the boat any,
You know, it, it seems like there’s a perfect storm for higher prices and, and, you know, think about natural gas and some of the other commodities and oil too. We just had, uh, three of the big supply demand reports come out, the IAA, uh, the U S Z I a earlier this week and OPEC. And can you let’s, let’s why don’t we just stick with the IAA or pick one that you want? W what is it that they may have missed coming into this, uh, where we are now versus say the last few last quarter or last few months?
Yeah. Cause I, I don’t think any of them had $80 as, as we had, you know, from, from their earlier reports. I think, you know, some of them during, during the year have been bullish, uh, some of the IEA reports have been, uh, have been bearish. I think they probably didn’t factor in what was going on in natural gas and in, uh, in call the, the big spikes in, uh, in those prices. I think it’s been a, uh, you know, I think it’s been a major factor, uh, and we will talk more about that. The, uh, undoubtedly, uh, I think demand is probably coming in a little bit higher than they had. Uh, they had expected slightly higher and supplies has been coming in slightly lower than they had expected. There’ve been some production issues in, uh, in the U S force for sure, in Canada problem in, uh, in Mexico. So crude production has been down a little, slightly lower than, than what they had, uh, what they had anticipated and really stocks have drawn more, I think, more than they had thought any of these, any of the agencies had thought, uh, as we, as we headed into the year.
So the, um, the IEA said something like, uh, they’re, they’re expecting 500,000 barrels a day more than they expected from September to the first quarter of 2022. I mean, that’s a, that’s a big, is that, is that, did they overestimate the Delta virus? Did they over underestimate the sort of the economy? I mean, w w what do you, can you, can you get out of,
I think, I think the answer is yes to both the IEA, uh, lower demand, because the Delta virus, they just increased demand basically because of the potential for fuel switching for power, uh, later in, later in the year. So, um, you know, uh, as we’ve talked to him, you know, these demand numbers have been really hard to, uh, you know, get it, get a handle on, you know, that we, the revisions are hundreds of thousands a day. And, um, you know, I keep tweaking my own, uh, you know, my own balances, uh, almost all the time. And they’re just the, the, just the moving target. It’s the one thing that is shared by all the agencies and by all the banks, is that is the expectation for a stock draw in the, uh, in the fourth quarter, which is why that OPEC meeting, uh, what in retrospect was, it was, uh, so important if you take, uh, OPEC, the EIA and the IEA for fourth quarter, they average about 1 million barrels a day, uh, of the stock draw.
The, and we, my numbers 1.3, I’m pretty, um, pretty close to the mean, which is unusual for me, but it, you know, it gives me a little bit of confidence, but let’s talk about that stock drug jam was, you know, as we head into the third core, as we ended the third quarter, it looks like, uh, we had a very big stock draw, uh, at least on OEC. These stocks have, uh, about 80 million barrels, which is almost a million by, you know, another million barrels a day where a 160 million behind the five-year average. So we’re really low on, uh, on inventory. And if we go, if we, if you move forward for the fourth quarter, we’re going to end up being 180 million barrels below the five-year average, uh, by the end of the fourth quarter, it could be more than that, uh, depending on the, depending on the weather. So the fundamentals, you know, they’re, they are they’re bullish. Uh, th they’re definitely bullish. And, uh, you know, the market has, has moved up obviously, uh, in response to, um, the petroleum fundamentals, but also, uh, undoubtedly the, um, natural gas and coal fundamentals and the pricing that going on there has, has also had a, um, I think it’s had a major effect, at least on sentiment.
Yeah. I mean, after reading the IEA summary, you know, you come away from that as a raging bull. So, you know, they, I mean, they, they mentioned there, there are 500,000 barrels a day increase in demand. I think a lot of it was attributed to a fuel switching. Right, right. So, I mean, the question for our listeners is, is what’s built into the price. Is it, is it right? Is $80 capturing, you know, this draw going into the fourth quarter or as, as that drop, if that draws correct. Which, which it never is, but if it’s correct, do we see higher prices ahead?
Yeah. And that’s, you know, th there is the art of trial of trading is try to figure out, you know, what point, you know, everything has gotten, uh, you know, discounted, uh, you know, is it 81? Is it the $81 WTI, $85, $90 though, UTI, you know, that that’s the, uh, therein lies the lies, the truth.
Yeah. I mean, I just can’t, I can’t read anything today without it being crazy bullish, you know? And, uh, when I, when I, when, when I read something like the IAA, especially, um, cause they’re so prestigious and I, and I come away feeling, you know, wow, this market’s going through the floor or I can’t believe we’re, we’re going so much higher. There tends to be a turnaround. I mean, I don’t have to go back and look, but a lot of times it’s like a, it, it it’s, um, you know, the information gets out there, uh, and the markets adjust and they go the other way. So is it D do you think that’s what what’s possibly going on? Are we going to have to wait to the winter and see if it’s a average, mild or barely cold winter before we see the price outcome?
Well, I can say this, that today we had inventories up by 6 billion barrels, which bearish, actually,
This is the weekly numbers, right? The weekly
EIA report that came out the market was looking for maybe on changed a little bit higher and, um, we’re up a dollar. So it seems as you know, it doesn’t seem, I mean, there’s, there’s another trading tell, you know, when you get bearish news and the, in the market, you know, rallies further, it seems like, you know, it still has some still has some room to move. And the other scary thing, Jim, is that, you know, if you look at the commitment of traders, we’re not even close to having the boat loaded.
They’re definitely long, they’ve gotten longer along the way, but you’re right. There’s still a tremendous amount of capacity for them to get to go all in.
Right. A lot. They’re not there yet. I mean then maybe that’s part of this leg, you know, this sec, this third, fourth, fifth, you know, the current leg up,
I guess that’s what I’m asking is how much is how much and to support anticipatory buying has already occurred. So that, you know, we come into say November and we see some cold weather coming through and the market goes down, you know, it was sort of an opposite tail of what you just described.
Right. And that could be okay. You know, the, the, you know, the, that could be the party’s over that at that point. Like, you know, given the way the market has been acting here, you know, and looking, and also you look at the fundamentals besides, you know, all this, just the, you know, margin, some pretty strong,
Uh, you know, not only here, but the European margin, so are decent. Nate, even Asia has, has shown some signs of, uh, improving. So the, you know, the product end is, um, you know, rallying faster than the crew. Then look at these cracks, you know, they’ve gone into, you know, they’ve gone into hyperspace. Oh, that’s, I mean, demand w we have, um, going into September and let’s talk about demand. Gasoline demand, for example, is still fairly strong for sort of the end of the driving season. When you say,
Yeah. Gasoline demand has been, has been very solid. Uh, I think we had, uh, uh, about, you know, it came in the gasoline demand for the driving season came in, you know, I think a little bit above expectations, you know, we’re not where we were pre pandemic, but, you know, it was right around where guys like me thought it would be. Right. And so far as we had to talk, Tobar the gasoline demand, the numbers are, are still pretty solid.
Yeah. And diesel
Diesel also diesel, diesel never had the big diesel demand has been good, you know, for months now. Right. Um, yeah. I mean, even, even, you know, in the pandemic, obviously, you know, in 2020 it took, it took a big hit, but not, not as much as gasoline. Right. Because we all were demanding goods and that’s still, you know, that’s still going on. So these will demand, you know, also a pretty, pretty solid.
And, um, are you seeing any, like, I mean, it looks like jet fuel as well, or, or is that still,
Yeah, it’s lagging, Chet jet fuel is lagging, but globally, there are more, there are more flights being, um, scheduled the, um, you know, a lot of these leading indicators are, are up for, uh, for jet fuel. Uh, I think some of the, as we know, some of the restrictions are, are, uh, being lifted. So you might have some longer haul flights. So it looks as though jet fuel, it may not get back to pre pandemic levels until, you know, maybe second quarter of next year or maybe later than that. But, you know, it’s, it’s also, it’s also improving, uh, as is petrochemical demand. So, you know, the, the, the demand side has been, yeah, I keep using the word solid, but, you know, that’s where it’s, uh, you know, that’s where it’s coming in. Uh, we’ll probably this year, I’m looking, uh, at the DOE numbers right now, and we’re going to be up about, um, 1.4 million barrels a day in 2021. And in 2022, the DOE is saying it’s 0.8 million barrels a day increase. I think it’s going to be more actually, because they’re really th they’re missing on gasoline. They’re really missing, I think for next year.
So this is, uh, like a confirmation that the economy is really strong or at least growing. And, uh, I think a lot of people for this quarter have ratcheted down their expectations for the economy, but mainly because of the Delta V variant, but, but, uh, pushing it forward into the next quarter or the quarter after that, there’s still this pent up demand. And maybe, maybe the Delta virus keeps it in check for a little bit, but down the road, it’s, it’s, we’re still gonna see strong growth in the economy going forward. And I guess my question is, you know, there’s, there’s not just a price effect to energy. There’s also an income effect and incomes are up, you know, from the macro level, not obviously not individually, but, um, is, are people going to be paying these prices? Are they, you’re going to see, and I hate to, I hate the term demand destruction. Are you going to say,
Yeah, neither one of us likes that.
Yeah. Listen, if you look at the demand curve, price goes up, quantity goes down. There’s no evidence of that yet, right?
Oh, no, they’re really not really. There, there isn’t at least that the, you know, gasoline prices let’s talk about us gasoline prices, the pump price, the average pump price right now on October 14th is $3 and 30 cents, which ordinarily would, you know, you’d think that that would spark some, uh, demand, you know, spark demand, uh, declines has, uh, you know, where there is a decline seasonally know that does, that’s just seasonality. But as I said, it’s pretty solid. It’s usually three 50 that really gets people out of their minds. But I don’t know if that’s going to happen this year.
Yeah. The P if, if w if one wants to get out and go for a ride in their car, they’re going, you know?
Yeah. And if they want, they don’t want to take the train to work, you know, they’re driving.
Right. And it seems like we have, even though people are still being delayed, companies are delaying the time to go back to the office. We seem to be at a high level since the pandemic of people going back to the office. So maybe that contributing to a gasoline demand as well.
Yeah. I think, I think that’s a, that’s definitely a factor. I think that’s a fact that I don’t see, you know, that they really have a soft first quarter next year, the EIA on gasoline demand. And I think first quarter, next year is going to be okay. I mean, it’s soft seasonally, but I think it’s going to be much higher than what they’re saying or what they’re saying,
But much higher. You mean in what? In demand?
Yeah, man. Yeah. I think they’re off by like 300,000 barrels.
Ooh. That’s, that’s a big number. Um, before we talk about, you know, what could derail this and what’s, what’s the, what’s the future before we get into the next quarter. I just want, I just want to, uh, talk about, uh, what we saw in options world, where I, I spend a little more time. And, um, it was kind of interesting that, uh, after once we popped up above $75, we’d see these, um, you know, large, uh, trading days on calls, not so much on puts, but as you might expect the markets trading into new, new, uh, ground. And, um, but it wasn’t like people, you didn’t, you saw the open interest numbers were subdued. They were, they were positive, but really small relative to what the size of the volume was. So it was kinda, it’s kinda like, uh, if you looked at all the volume together, it looked like people were liquidating calls, but at the same time, maybe rolling up to new strikes or getting into new ones.
And obviously it’s, um, all traders are doing different things. I’m just saying, when you collectively looked at it, that’s, that’s what looked like it was going on. And, you know, recall back in the first quarter, that’s when we saw a lot of core buying for not only 20, 21, but 2022. So the, so the top three out of the top 10 open interesting calls, three of them are still in December of 22 led by the a hundred dollars call was 67,000. And so the, the, uh, 98 calls, 32,000 that’s number two. And so, you know, it’s not, there’s not like a lot of open interest. It’s spread out pretty, uh, pretty good. But my point is we, we just didn’t see this crazy call buying. It was almost like, uh, the call market had anticipated, uh, this rally and, and waiting for it for a long time.
And now they get it. And there, you see a lot of liquidation on the put side there, the volume wasn’t, Y you know, it wasn’t as big as the calls and this, this is in general, I’m speaking, but we did see open interest increase in, puts more than calls. So, so perhaps we’re starting to see, you know, they could be contrarians like me, that’s, that’s the way I would play this market if, uh, you know, if I, if I wanted to play a downside, because, you know, you just can’t pick the top here. It could be producers saying, Hey, we got, we had put something on because this market’s really, uh, soaring, but we did see it. So again, it wasn’t crazy, crazy stuff is just, uh, uh, trending and, um, in, uh, in the spread options. Um, I dunno, we didn’t talk about the structure yet, but, uh, those were kind of subdued. We didn’t see much volume in those, but, um, so why don’t we, uh, why don’t we talk about the, the structure that the, the in crude oil and, um, before we go into the, what, what, what the outlook will be?
Yeah. You know, Brent’s been friends from pretty well as we backward, dated for four months here around, you know, 60 or 70 cents, but TCI has been, you know, has been backwardated 20, 30 cents, something like that. And then all of a sudden on Monday this Monday, the 10th, was it, uh, whatever Columbus day was the, the front month Novi D’s just took off. And, you know, it, it had, it had the smell of somethings going on, but you don’t know exactly what went into the seventies. So there was like, oh my goodness. You know, we’ve seen these before. You don’t know exactly what what’s going on. And it had has since retreated, but nevertheless, that was, uh, you know, that was a pretty big move on Monday. I think it retreated into the high fifties right now, but you look at like these DCE and it’s almost 70 cents a month. Uh, so the market is expecting that things are going to remain, remain pretty tight. That’s those are big numbers, 70 cents a month backwardation
They are not coming up in the back. Now that I was just hoping that you would say something like this, so we could go into, you know, the expectations you say, we were looking for big draws in the fourth quarter. Uh, when does it start to turn around and maybe get, when did we get to see surplus,
Right. And that is probably going to be well, that’s probably going to be in the, at least globally. It looks as though the, uh, first Horter looks as, as if it’s going to be, we will see surpluses. We’re looking for about a half million barrel a day surplus in the first quarter. OPEC is looking for a big surplus. If you, if you try to impute what their production is going to be, but if they, if they produce, you know, increasing X number of barrels a month, you know, it looks like they’re gonna, they’re calling for a 1.9 million barrel a day increase in the first quarter. Uh, the EIA is flat and the IEA is also half a million barrels a day increase. So we’re, we, it looks as though, so we headed to the first quarter. And for us, we have an increase in this CRG.
Uh, we’re looking for an increase in the second quarter as well. Others, not so much. So, you know, production, uh, should increase not only from OPEC, but from, uh, the plus part of OPEC, uh, Russia in particular. And we’re, we are going to see us producers be increasing their business. Like we said, at the outset of the podcasts that there are, you know, they’re already there, they are increasing. We’ve seen that. We’ve seen the rig count, you know, double from its lows just about. So I think production is going increase faster than what the, the EIA is, is saying. Although in fairness, I think I’ve been saying that every single project,
Me too, from the beginning last year, I said, these, these, once these guys get good oil prices, they’re going to be producing like crazy and that,
And they they’ve really been, you know, we see we’ve seen great discipline. You know, I used to instill you get up here, you just have to one there. Cause they, they, you know, this is also part of their business.
Are you surprised OPEX been able to hold it together as long as they have? I mean, I know last it’s really not that long because it’s just about a year and a half ago, OPEC was falling apart. That’s why we, that’s where we got a minus $40 oil. And so they, they had that really disastrous, I think it was back in March of last year, uh, meeting and ever, ever since they got, uh, they saw what could happen. Um, they’d been kind of in line or are very much in line. Are you surprised at that?
Yeah. Yeah, I think so. I mean, after, I mean, after a few months of the, them doing PR you know, month after month after month of, of doing what they said they were going to do, uh, I guess by now it’s less of a surprise, but you know, it’s worked, the Saudi Russian strategy has worked then for those producers who can’t even make their, their allotments, you know, the African con producers in particular, you know, they, they can’t even make what they’re, they’re allotted, you know, why not? You know, you’re going to go along with what the Saudis are saying because it’s worked right. They also caught a, uh, you know, they, they did catch a geopolitical break with, uh, the, uh, negotiations between the us and the, the Iranians not getting restarted. And that, that is, you know, maybe some point in the, in the fourth quarter that they could restart this. There’s no real indication of that. Uh, which means that as we head into, you know, the first quarter of next year, you know, Iranian barrels are unlikely to be coming onto the market. So that, that helped, you know, that was a tremendous help. Right,
Right. It’s like OPEC is, I dunno, who’s looking at home, but, um, they’re looking at the fed. This is some sort of reverse taper, and there’s just letting out a little bit, a few barrels each month. And, and, uh, so you think in a first quarter of next year with say the U S production, I guess Canada’s had some issues, Brazil coming, coming back and OPEC just sticking to their game plan. We will see a surplus at some point, not a big one, but
So th that’s what the numbers look like. Again, that’s based on OPEC. Do we want the okay. Plus doing what they say they’re going to do? And I do think us productions arise, uh, some increase in Europe, Canada, you know, may be more than the second quarter. Brazil fell short of what they were expected to, which has happened a number of times in the past where, you know, they’ve had, you know, they’ve had big ambitions for the year and it sort of falls flat, which happened this year. Incidentally, they were expected to increase production by 200,000 barrels a day. And, um, you know, it looks like they’re going to be flat on the year, but next year they’re due, they’re due for an increase of 200.
Yeah. And, you know, getting back to the IEA and OPEC, um, AA was talking about OPEX surplus capacity. Sometime next year, we’ll be down to 4 million barrels from, uh, I guess, a recent high of 9 million barrels and, you know, kind of, kind of hinting that that’s also also bullish. And, um, you know, who’s, who’s going to have the excess capacity. Is that all Saudi
Pretty much? Well, so Saudi the Persian Gulf producers, uh, who will also be increasing as the year as the year goes on, remember this deal ends April 30th. So we’ll, we’ll, you know, we’ll see what the next, you know, where the next strategy takes them. Russia has spent, you know, looking at the non OPEC, uh, Russia has spare capacity. OPEC is saying that they think, uh, Russia is going to increase by a million barrels a day, uh, total liquids next year, and us by like eight to 900,000 barrels a day, total liquids. Well guys, I think that’s possible. I think that’s possible if not plausible.
And, um, do, do you want to say anything about natural gas?
We haven’t, we haven’t really talked about the elephant in the room About the elephant in the room.
Yeah. Let me, let me start off because, uh, you know, it’s been a pretty cool, uh, cool. It’s been a interesting option markets. Um, I think, I think we, we got to the second, uh, second highest, uh, Val this time, let’s see, I’m looking at my numbers. First time was, uh, based on my numbers. Uh, we got up to 140% implied volatility back on, uh, you have a DCE of 2000, which I believe was the first time in the natural gas futures era that, uh, prices got up to $10. So if you remember all those, you know, there were a lot of, I know there are a lot of locals on the floor that, uh, had shorted those and, you know, eights, nines, and tens. And they, um, kind of, uh, I don’t know if they blew out totally, but they, they got, they got hurt.
And th the second time would have been the current situation. I have October of around one 30 to 1 31 thirties, basically. And that’s it, it’s not over yet. You know, we get a cold, cold winter. We could, we could get, you know, even higher than that. And third was, um, November of 2018, when we had that, uh, I forget what the name of the company was, options, sellers.com, something like that. We had a cold snap in November and they blew out all their short option positions and they had to scramble to cover. But th this is a, um, this is a big move and, you know, in, in volatility. So it’s kind of, uh, you know, I got the long-term chart. It sticks out amongst, amongst the volatile chart over the years. And you notice, I didn’t mention Katrina. That was a, that was a big spike, but not like, not like this. Yeah. So, yeah. So what, what else?
This is another one for the books, right? I mean, true books. Um, and you know, certainly we saw guests. It was, was it late? Yeah, it was late last week when, when guests spiked to six 50, because Europe was going bananas Europe. I think that the Dutch TTF contract was traded up to $40. Crazy. It was crazy. I mean, there was definitely panic, you know, that was a panic in the air. Uh, it, it affected, you know, it affected everything, uh, including, you know, including petroleum, obviously, because we’re looking at, you know, the, the expectations are, it could be as much as half a million to a million barrels, a day of fuel switching for those utilities that can use, uh, petroleum liquids, uh, as, as an alternative to natural gas and incredibly for, you know, it works economically. It works, but no one’s done it yet.
You know, that, that hasn’t happened. Uh, but so this is all anticipatory buying. Is it okay if we have a cold winter, you know, demand is really going to spike, you know, speaking about not only of course in Europe, but China too is, is having its its issues where they’re, they’re having, uh, they’ve put restrictions on utilities because of a lack of lack of call. Uh, they now in, in, you know, as soon as we look ahead to a cop 26 in Glasgow next month, you know, that they are pleading for their they’re mandating increase in, in, in minors to increase production of call.
Yeah. Well, I guess I should say right here, my, my name has nothing to do with coal. What’s really, it’s an English. I think it means cold stream, like a burn as a stream of water. I think my, my family comes from a cold stream area in upper, uh, England or Southern Scotland. So it’s got nothing to do with COA, but, um, yeah, it’s nevertheless.
Yeah, I probably get, yeah, I get, uh, people looking, see if I want to go work in that industry on LinkedIn or something. I dunno. Um, but one thing I’m not seeing Andy is, is a spike we’ve already, I mean, we had a big move up in, in, uh, the carbon allowances in Europe, but recently it’s come off its high. And I don’t know what that, if that means anything, if that’s, if that’s a liquid enough contract to mean all these folks that are burning coal have, uh, locked up their, uh, emissions allowances, or maybe it means nothing, you know, but, but it has, has come off its high. So maybe we’re going to see a little turning point and a lot of the anticipatory stuff has been done for the time being, and I’m just hoping, you know, we’ve, we see the volatility in weather, hopefully we’ll get that little higher trend of temperatures over the winter so we can get a little break from, uh, from what’s going on here, that the, uh, do you, do you look at the heating oil budget, Sandy at all going forward? It looks
Well, the government has put out, did you see that end users are, are going to be up? What was it, 30 to 40% on, uh, on heating wall?
Yeah. Depending on what you use yet, there’s nowhere to hide basically whether, you know, um, I guess
There’s nowhere to hide that that’s, uh,
I too, you know, it’s funny when you get beat up in a market, that’s so volatile, you look for something that might trade, you know, a little more calmly. And so I looked up, I was looking around, I was looking at the old standby oats and it’s, it’s in a raging bull market. I mean, I put it on LinkedIn. I couldn’t believe it as they go. It’s every, you, you can’t hide. I mean, everything’s going crazy,
Definitely that yeah, you can’t, everything’s going crazy. Uh, so you know, this inflation is, is definitely in place, has had an impact, although, you know, commodities are causal, um, not so much as a, not so much a result, but
I have a little theory, uh, that probably have mentioned before to you a nauseum, but, um, you know, sometimes you see people going back and look at what, what, uh, presidencies have done well, what it’s economically and which ones haven’t. I always think it’s, it’s, uh, probably more accurate to look at where there were energy spikes. So if you think about the Jimmy Carter administration, he, he came smack into, uh, what a tripling of oil prices due to embargo, you know, George Bush, the senior had the Gulf war, and right after that, it was a recession that, you know, there’s probably why he lost the second term. Clinton administration had pretty good oil prices through that. The whole thing, decent, you know, good growth, uh, good economic times. You know, when you think about Obama, he had a hundred dollars oil for a while, and then, uh, you know, so, so I, I think, and, and it was like a headwind to it, to the, to the economy. Anyway, I just think, uh, you know, we talk about inflation, but, but these, these higher prices and energy should they be maintained or probably, uh, in a way, uh, deflationary for the economy, you know, we could see it, uh, ma major headwinds going forward.
Yeah, I think that, that definitely, I mean, that’s definitely going to be a drag on the, uh, on the economy. And, you know, you look at, you look at China, uh, with, with factories having to be closed down because they don’t have enough electricity. So those goods are not going to, you know, those goods are not making it to market as quickly as they, as they might. Uh, you know, we’ve talked about, uh, we have it in this podcast, but, um, our listeners have heard a lot about supply chain, of course, and, you know, the it’s going to be a continuing issue.
Yup. So, um, you kind of basically going forward, let’s talk about your, I don’t want to pigeonhole you here, but, uh, you’re, it sounds like you are friendly to the market. Yeah. I think
There’s still upside.
Do you think there’s still upside? You want
Let’s look at the market’s behavior, you know, it, it feels like it’s still wants to go higher.
Yeah. And there’s, there’s still room to run on the upside.
I think there is. Yeah. I fit. I think, I think there is, um, yeah, maybe it’ll get to a price where the, you know, really, it really does inhibit demand, but we don’t seem to be there yet,
You know, at 77 degrees in New York today, right? Yeah. It doesn’t make you nervous
That it said that it all fits a warm, warm winter. I’d love a warm winter. I’m sure everyone would love, you know, be good for everybody market could, you know, we’ll come off. I mean, you know, the other thing is we didn’t really talk about this, that what we did, but you know, diesel’s tight here and it’s tight in Europe and you know, where it’s tight, it’s tight and pad one where it’s needed.
So you’re saying no imports,
Well, gasoline, the, it does some work. And here, I don’t think that we’re going to be seeing huge imports. It’s not the Arbus open, but I don’t know if, you know, Europe is going to be able to supply us. They have their, you know, they have their own issues. So it’s
What will happen is that, you know, us refiners will increase their yields of, of distillate, uh, of diesel, you know, maybe, you know, maybe stem the tide. So yeah. Things, the things do look things to a Polish, of course, that that in itself is, is, can be bearish.
Yeah. But I like what you’re saying. I mean, you’re so, um, I see the, the crazy bullish stuff, and I’m saying, you know, we’re really close to it, you know, topping out here, but you’re saying, you know, and that’s not so fast. We, we still have room to run. And I guess you’re also saying if we do come down, you know, assuming it’s a more normal winter, it’s going to be gone down kicking and screaming. Not, not a collapse.
Yeah. Yeah. Normal winter. Yeah. Very warm winter. That’s a different story.
Yeah. Yep. Uh, anything else you want to mention, Andy, that we I’m sure we missed a lot because there’s so much stuff going on out there.
I mean, we, we, we definitely missed a lot, but I think, I think we actually covered a lot also. I mean, I mean, each thing that’s going on could be a podcast in itself, you know, particularly the what’s what’s happening on the, uh, on the natural gas side.
And did you know that I’m part of, I thought, oh, oh, demand was just horses, but apparently oat milk is huge. Now. I never knew that till I published that
You go to every coffee shop to man. Oh, you see that day have, you know, that old milk is, you know, is always offered.
I get espressos and I’ll get milk. Yeah. I dunno. It just, a LinkedIn is great that way you post something up and you get this comments and you, you learn stuff. So it’s good. Okay, Andy, uh, we’re good.
As usual, If anybody has a question or wants to get ahold of us, you can email me at firstname.lastname@example.org.
And I’m on LinkedIn as well. It’s probably the best place where I spend a little more time. Um, you can find me on LinkedIn and I’ve tried to post once a week and we’ll put this podcast up on LinkedIn. We’ll put it up on our website as well. And we’ll see you next month, Andy.