Oil nears the moment of truth

Oil flat today

Oil flat today
I did a video recently where I talk about the importance of watching markets that aren’t moving and aren’t grabbing headlines.
At the moment, that’s oil. WTI is flat today and looks like it will stack up another doji star on the chart. It’s normally one of the most-volatile assets but it’s been stuck in a sub-$5 range since March 18.
I’m a big time oil bull and I have been for many months but this is the kind of chart that makes people on both sides of the trade worried. A break is inevitable and the longer it stays here, the more likely it is to be a violent one.
Platts’ survey today showed OPEC+ is wavering in its compliance and that Iranian and Libyan barrels continue to increase (they’re not subject to quotas). Russia has been particularly lax in compliance.
We’ve got 2 mbpd coming back online through July and the WHO is warning about rising covid cases and deaths globally.
On the flipside, the US reopening is looking impressive in almost every way. Gasoline and travel demand is way ahead of where almost anyone thought it would be and will keep getting better. At these levels of production, global inventories are being drawn down.
So there are two trades (from my perspective):
  1. Hang onto longs and hope the trend continues
  2. Cut longs and hope to buy back cheaper
If it’s #2, the question is where to buy? The area around $52-54 looks attractive but a flush to $48 would be the real pain trade and a magnificent level to buy oil or oil companies.

Iran has released a South Korean-flagged tanker (& its captain) it seized in January

Iran released South Korean-flagged tanker Hankuk Chemi and its captain.

  • Iran released the crew in February but many stayed with the ship.
Some good news.

A trader (or traders) with a $40m punt on a US stock market collapse

Reuters report on a big trade on US options market Thursday

  • One or more traders laid out a roughly $40 million bet that the Cboe Volatility Index will break above the 25 level and rise towards 40 by mid-July
  • The VIX closed at 16.95 on Thursday, its lowest close since February 20, 2020,
More at the link here with an explanation as to why the bet is probably on a drop not a surge. By mid-July.

UK to decide May 17 on permitting international travel

The UK  government’s Global Travel Taskforce

 

 

  •  says it will announce in early May which countries will fall into red, amber or green categories in new traffic-light system based on covid risk
  • says it will confirm in early May whether international travel can resume from May 17
  • says restrictions for inbound passengers such as 10-day hotel quarantine, home quarantine and testing will apply differently for arrivals from red, amber or green countries
  • says there will be a “green watchlist” identifying countries most at risk of moving from green to amber, to warn travellers of potential changes in advance
  • says key factors in assessing countries will include percentage of population vaccinated, rate of infection, prevalence of variants of concern
  • recommends removing “permission to travel form”, meaning passengers would no longer need to prove valid reason for leaving country
  • says it will work with travel industry and private covid testing providers to try and reduce the cost of travel while ensuring travel is safe
  • says efforts to reduce costs could include cheaper tests when holidaymakers return home, and looking at whether government could provide pre-departure tests
  • says UK will play a leading role in developing international standards around a digital travel certification system
  • says UK government working on certification for outbound as well as inbound international trave

 

Headlines via Reuters

The pressure is on to move towards more normal heading into the northern summer. That’d be good for the economy, good for everyone if it can be done as safely as possible. International travel will be one of the dividends of the UK’s competent vaccine rollout.

ICYMI – CME Group has hiked COMEX copper maintenance margins by 10.9%

CME includes the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and The Commodity Exchange

Given commodity price volatility, copper in particular, maintenance margins for HG have been jacked up by over 10% to USD6,100 per contract

Major indices close higher. New record for the S&P.

Major indices close near highs for the day

The major indices closed the day near record highs. The S&P is closing at a new record level. The Dow is closing about 24 points from its all time high at 33527.19.  The Nasdaq is still 1.89% from its all time high close at 14095.47 (the all time high is 14175.12).

A look at the final numbers are showing:
  • S&P index, up 17.22 points or 0.42% at 4097.17. The new all-time high comes in at 4098.19
  • NASDAQ index up 140.46 points or 1.03% at 13829.30. The high price reached 13830.14. The index is 265.33 points away from the high close.
  • Dow rose 57.31 points or 0.17% at 33503.57. The index is just 23.62 points from the all time high close.  The all time high price reached 33617.95 (114.38 points higher).
Yields were down again today which helped the Nasdaq type stocks. The small cap stocks also closed higher on the day after sharp declines yesterday.
  • Russell 2000 index is up 19.53 points or 0.88% at 2242.58
US major indices close sharply higher