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I'm confused. Did gas go down because the dollar strengthened? Did the dollar strengthen because of the SEC suit against GS? Why would that strengthen the dollar?
Or, did oil prices decline or because the SEC suit signifies a final recognition of the real weakness in the US economy which may soon fall back into recession (due to financial hanky panky and government debt) and thus depress demand for oil?
Or is it both?
all of the above. Am a subscriber to his reports from way back.
here is the deal: he knew GS position in oil (long) and spoke many times in the past on this oil carry trade they had on. Long Oil, Short Nat Gas and short dollar to finance. They putthis on and recommended ot clients as well. Meanwhile the fundamentals for ever were crap. Nowthe fundamentals are friendlier adn teh De-risking is happenning. bottom line. Oil down, Nat gas up. GS is either unwinding, or people are frontrunning them. Peter jsut won't make a controversial statement like that.
Listen. I agree about the oil carry trade that Goldman's been running. A lot of banks and funds are running the same play.
But if Goldman unwound positions today, somebody else jumped right in and bought them. And I can't imagine Goldman unwinding sure things like this just because some peon outfit like the SEC is suing them. Goldman people would be trading on their last day before prison.
The contango is the largest I've seen since the Sept. and December lows. And tanker rates have just fallen. As you know, Bernanke's providing Monopoly money to any taker for practically no charge. All of the 40 million barrels of crude that just came off of tankers is going right back onto tankers pronto.
The last time the contango premium was this big, we got a $15+ run-up in the price of oil in 16 days. That's what happens when you take 40 million barrels out of the market in a short time period and hide it from the market on tankers.
The only thing I've ever seen work against this play (and consequent price run-up) has been massive forced selling of futures positions. We saw massive forced selling, for example, when Goldman removed gasoline from the Goldman Sachs Commodity Index in August of 2006 as a favor to Bush before the elections. The next time we saw forced selling like that was during the big deleveraging event that bottomed in March '09.
Unless you see a massive forced selling event coming up (I don't), I see long oil as a good bet right now, not because of fundamentals but because of contango and tankers. The DX may have to retest its recent highs first. Natural gas finally looks like it's stopped its fall too.
No argument on any of it. Personally, people are just front running what they think GS may have to puke.
Thanks for the analysis, Moe. Please keep it up, and I pray the ZH crowd will eventually understand, and act on, the perils and promise of the energy markets.
just a word on fundamentals --
keep an eye on the stuff coming out of Iceland ...
short term, there's a major drop in the demand for jet fuel,
but a bit farther out, large eruptions in the past have brought about serious "global cooling" ... look for demand for coal, NG and uranium all to rise ...
peple do not like being cold in the wintertime ...