Is Something Blowing Up In OIL?

Tyler Durden's picture

A week ago we warned of some insane movements and mysterious bid in OIL (the Barclays iPath oil tracking ETN) as it traded a stunning 36% rich to its underlying NAV. Well with oil resurgent today, as contracts roll, something just imploded in OIL...



As Barrons noted, the sharp performance divergence stems from the ETN’s massive price premium over the value of the index it tracks.

Pravit Chintawongvanich, head derivatives strategist at Macro Risk Advisors, notes that OIL’s premium rose sharply in recent days and accelerated to 48% by Wednesday’s close. He told Barron’s that institutional traders noticed the extreme premium and are now betting against OIL on the premise that the unusually large premium will revert to normal. Trading volume in OIL was already more than triple the average over the past month on Thursday with three hours left in the trading day.

Even after today’s drop, OIL is still at a roughly 20% premium to its underlying index.

Chintawongvanich says that it’s not too late for investors who own OIL to ditch it for USO: “You don’t want to be stuck holding the bag when this drops to NAV.”

*  *  *

Simply put - retail moms and pops who piled into OIL without thinking about NAV or technical flows just got f##ked!

As we concluded previously, The current situation is eerily reminiscent to the heyday of the mortgage market in 2007, when mortgage defaults started to pick up, and yet the credit default swaps that tracked them continued to decline, bringing losses to those brave enough to trade against the crowd.

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Deathrips's picture








Edward Quince's picture

Please control yourself and get back to work. We need your contribution to our productivity metrics. If the peasantry isn't working, there will be no money to be had and you shall not get your iphone 6s.

RadioFlyer's picture
RadioFlyer (not verified) hedgeless_horseman Jan 21, 2016 2:30 PM


DirkDiggler11's picture

We should hang her with her Golden Lasso !

Aaaarghh's picture

i just puked a little in my mouth...


Cadavre's picture

Dropped a smidgey widgey of mud myself.

MiguelitoRaton's picture

Southwestern Energy just cut 45% of staff, shit is getting real

Osmium's picture

Time for Bullard to say there has to be a bottom in oil again?  First time didn't take.

NoDebt's picture


Chinese Russian.

Uchtdorf's picture

For his bio page, go here:

He's realer than Santa Claus.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Uchtdorf Jan 21, 2016 7:09 PM


Dindu Nuffin's picture

If you want to see the underlying NAV for any ETF.  Simply type the ETF name + "-IV".  I remember when TVIX traded 50% above its NAV for a while and then crashed like 1 month later.

To this day, I still always check uvxy versus uvxy-iv.  :D

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Dindu Nuffin Jan 21, 2016 7:59 PM

+1 Fortunately, it is just below NAV. :-)  I went in at 205.77 about 13:20 ET assuming the bounce had finished.

abyssinian's picture

Yellen in a see through condom with wings? 

Ham-bone's picture

Couple points to consider -


Oil bottomed in Dec '08...the same month QE was implemented

Oil began it's fall in Aug ' QE was tapering out and terminated as of Oct '14

When the Fed stopped accumulating Treasury's via QE in late 2014...why did foreigners do likewise and stop accumulating???

What is the linkage of QE, the dollar, Treasury's, and oil?

Now, lets look behind the curtain...I know I don't have all the answers, but hopefully some of the right questions.

CrabbyR's picture

Interesting link....clarified a few mysteries for me

More Ammo's picture

but the fact there is no level of organic demand that can avoid a depression unlike any we have ever seen is obvious.


I think "depression" is a little optimistic...

Oldwood's picture

A little confused here. Are you saying people should hold their positions in the market and pssibly buy into it? I'm not and "investor" or a gambler so my exposure is limited to collateral damage, but still. Put it all into paper? I'd rather buy copper...or nickels.

Ham-bone's picture

Sorry if I've confused you...imagine what it's like to be me :).

I'm not qualified to make any statements regarding whether to buy or sell...sorry, I shouldn't have gone there.  Everybody has to make up their own mind on this point.

Jtrillian's picture

Well said.  I also agree that precious metals are good place for at least part of your portfolio (along with other hard assets).

More Ammo's picture

We should hang her with her Golden Lasso !

Dirk, didn't the golden lasso make people tell the whole truth?

jeff montanye's picture

i wish she could just wrap herself in her own lasso when next she addresses pretty much anyone with a camera and microphone.

be nice to have the clintons, obama, bush and cheney inside it too, but it would take some complex bait.

BarkingCat's picture

Oh my god, how does she not step on her nipples in the shower??

The best Sun's picture

Clearly she throws the whole of both teets over her shoulders and ties them together.

Bahrainiac's picture

You Gellin'?  Like Magellan, baby!!!

SoilMyselfRotten's picture

I'd appreciate her superpowers more if we could see the plane while SHE was invisible

Miles Ahead's picture

Pravit Chintawongvanich.

Thai.  Oh my.

Last time they had their finger on the button they blew up Asia, 1997

lasvegaspersona's picture

can't be Thai...the name is 3 syllables short of a proper Thai surname...

hedgeless_horseman's picture



I thank God I am not a head derivatives strategist.

Soul Glow's picture

Poor fucking day traders.  Take Greg Manerino for example.  At the end of the first week of January he "Wasn't worried" and still thought "We'll be green in 2016 because it's an election year."  Then yesterday I check his youtube channel.  No mention of his past trades, just that he was now uber short and thought the DJ would crash 500 points!  My take on his trade was that he thought it would happen soon.  I mean, hence the name "DAY TRADER" right?

Well the thing about finance, and one reason I love it, is when you are right you are right!  And when you are wrong you are wrong.  SItting on a losing position - and telling everyone you will make them money - isn't just not making you money, it is losing you - and everyone else - money.

So yes, being head of a desk would suck, being a day trader that sells trading advice would suck, telling people you will make uber amounts of money if you subscribe sucks.  Not only because of the pressure of dealing with everyone's money, but because when you are wrong and don't admit it, you should be shamed.

This is Greg Manerino, and he will make you rich!  Or not....


OldTrooper's picture

So, what is your youtube channel?  Let's see you put your trades up for the public to see.  Are you pissed because you took his advice on a losing trade?

I'm not really interested in whatever personal vendetta you have with this guy.

Lore's picture

Canada's Michael Campbell likewise foresees market swings with perfect clarity in retrospect. "We saw this move coming, and told our listeners weeks ago." At patting himself on the back, he seems talented.  At trading, I can't say, as I have yet to hear a brilliant trade in advance. 

Antifaschistische's picture

buy the etf buy the eft

"Simply put - retail moms and pops who piled into OIL without thinking about NAV or technical flows just got f##ked!"

....and that says it all.

besnook's picture

anything that portrays old yellern as doable with a bag over her head is gross.

jeff montanye's picture

think of andrea mitchell clambering onto the maestro if you ever swallow poison.

stormsailor's picture

okay, a show of hands here,  did anybody cry when they shot old yellen?

Deathrips's picture

Shhh...dont spoil the end of the movie. FUCK

This forced PPV is really I like surprises.



janus's picture

thanks for those, Hitlery-4-diktator.

they got me thinkin about china and cigarettes. 

funny thing about china: last night one of their young scions from beijing gave janus a half-pack of the best cigarettes i've ever smoked -- i just extinguished one before clicking to reply.

funny thing about cigarettes: i love em.  cigars?  too much of a commitment (a ten minute smoke is all janus needs).  pipes?  too cumbersome and too many components.  yup, cigs it is for janus.  cigarettes tell us a lot about a given civilization.  if they're being smoked to the butts, times are tough (smokers trying to squeeze out every last puff).  when they're discarded half-way through the burn, times are boomin.  and, on the main, the quality of a given civilization's cigarettes tells us how far they've come and where they're going.

funny thing about america: we're supposedly so exceptional, but every other advanced nation has far superior consumables. our beer sucks.  our food is mealy, flavorless, pre-processed and denuded of all nutrition.  and for God's sake, we grow the world's finest tobacco and smoke some of the worst cigarettes...hell, marlboros are 25% filler!  fuckin idiots -- you're smoking cardboard for the privilege of aping a cowboy's silhouette.  janus normally smokes rollies imported from belgium or holland, but...

funny thing about these cigarettes:  they are only available for top party members and only sold in beijing & shanghai.  there is a single word printed on the package in our familiar phonecian characters "HUANGHELOU".  they are of such high quality, smoothness and subtle spicey notes -- i can't say enough about these things.  and to my mind, they say a lot of impressive things about china.  crazy world, gentlemen...janus has been smokin for 22 or so years and the best cigarette i've ever smoked was the gift from a chinese teenager.  

"Andy" was impressed that janus so readily recognized the level of quality...he said they are highly prized and sought after in asia (brand of choice among all the made men in the triads).  

yup, gentlemen, china is a major player on the world stage and gonna stay that way for some time.  no doubt about it -- hypersonic missiles with evasive capabilities and cigarettes like these?  'who knows?' muses janus as he pulses billowy smoke rings from his nose, 'china may well make a colony of japan in the next decade or so.'

some may walk a mile for a camel...janus may very well do the backstroke across the pacific for a carton of "HUANGELOU".  

pity, i only have 4 left.  2 will be reserved for an appropriate occasion (promise made to Andy), leaving only 2 for smoking at my discretion.  

maybe i'll smoke 1 more right now as i watch those chinese icbm videos.  and you amoricans say you want to elect hillary president?  

funny thing about amorica: it's hard to at times remember why i'm so patriotic.

anyway, thanks again for the cigs, my Chinese friends -- yup, i capitalized the nation's name.  they honor janus, janus reciprocates.

we live in interesting times.

smoke em if you got em,



Iam_Silverman's picture

"funny thing about america: we're supposedly so exceptional, but every other advanced nation has far superior consumables. our beer sucks."


Only if you buy the generic crap from the 7-11 coolers.

Here in Texas there are several breweries that make exceptional beers.  Just finished an Ugly Pug from Rahr Brothers Brewery tonight.  My wife had a Vanilla Porter from Leigen-something brewery.  Those are pretty good, but I also like a good coffee porter from a brewery in Houston.

There are good American beers out there, you just have to put a little more effort into finding them.