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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chunga's picture

I don't know what it means either. I'm skeptical when the price of *anything* goes down, so I'll go ahead and assume all this is being done to destroy Russia.

Once TPTB destroys Russia, there won't be anyone left to challenge them and then everybody gets super-duper-fucked.

insanelysane's picture

I really hate to throw the answer out there now that we know the FED monitors ZH but here it is.

Gold used to be a real problem for the money printers until they legalized paper gold.  This made the supply infinite and the physical nearly worthless.  With oil, the exact opposite is necessary.  The money printers must making trading in oil illegal for everyone except those that can actually take delivery of oil.  Then the market can be controlled and the price can be fixed somewhere between $90-%110/barrel.

besnook's picture

that makes too much sense is too fair for the zionazis to ever consider it. imagine, you can't order something unless you take delivery. that is just stupid.

lehmen_sisters's picture

Pretty fucked up when just having cash in a coffee can is the best move a person can make...besides occasional boating accidents to keep you honest. 

More Ammo's picture


do you me gold, silver and lead?

SoDamnMad's picture

Somebody on a Russian missile cruiser is an invester who knows the order to launch a strike at Riyad is to be ordered soon.

buzzsaw99's picture

paper oil. imagine that. [/forrest gump]

adr's picture

Whatever is going on has nothing to do with actual oil. This machine driven insanity needs to end.

Gasoline in my area is still selling where it was when oil was $65 a barrel. I can't wait for $4 gas on $50 oil.

seek's picture

It's all about funding the entrenched powers ongoing operations, exactly the same as banking, etc. Things are falling apart so they're trying to maintain revenues to sustain themselves.

I was suprised to see that monthly miles driven actually is increasing -- miles driven is up 3% y/y v. gas prices down 3% y/y. From a high level it sure looks like they're trying to maintain a consistent cash flow and increase profits. (At the consumer's expense, naturally.)

tarabel's picture



What sort of overpriced shithole sells gas at +4 a gallon? I paid 1.64 two days ago.


db51's picture

Ass Fuckings everywhere.   Most farmers in MI, IA, NE KS are paying $ .99 for dyed farm diesel.   Here it is $ 1.49.   Motherfuckers.

wizteknet's picture

1.48 texas and crying about it, unemployment

Bahrainiac's picture

$1.38 here in Okieland!

Mr. Schmilkies's picture

"Chintawongvanich says that it’s not too late for investors who own OIL to ditch it for USO."

Probably should ditch both.

silverer's picture

"Let the games begin!"

arbwhore's picture

ETN = Exchange Traded Nothing.

adr's picture

I thought that was the ticker for the S&P.

arbwhore's picture

No. That's SPY = Son, Prepare Yourself.

DontFollowMyAdviceImaDummy's picture

they're just warming things up for the massive influx of Iranian oil that'll remove the last pockets of retail wealth for sure.

JustObserving's picture

The fall in oil is an orchestrated attack by the US and its major banks on Russia (along with Venezuela, Brazil, Nigeria, Iran, Mexico and many other oil-producing economies)

Saudi Arabia is playing a major role.

The USSR collapsed when the Saudis reduced the price of oil to under $10 a barrel in the mid-1980s.

Now Russia is losing $1 billion a day in revenue due to lower oil prices

The Oil Coup US-Saudi Subterfuge Send Stocks and Credit Reeling


U.S. powerbrokers have put the country at risk of another financial crisis to intensify their economic war on Moscow and to move ahead with their plan to “pivot to Asia”.

Here’s what’s happening: Washington has persuaded the Saudis to flood the market with oil to push down prices, decimate Russia’s economy, and reduce Moscow’s resistance to further NATO encirclement and the spreading of US military bases across Central Asia. The US-Saudi scheme has slashed oil prices by nearly a half since they hit their peak in June. The sharp decline in prices has burst the bubble in high-yield debt which has increased the turbulence in the credit markets while pushing global equities into a tailspin. Even so, the roiled markets and spreading contagion have not deterred Washington from pursuing its reckless plan, a plan which uses Riyadh’s stooge-regime to prosecute Washington’s global resource war.

Falling oil prices and the plunging ruble are not some kind of free market accident brought on by oversupply and weak demand. That’s baloney. They’re part of a broader geopolitical strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian landmass. It’s all part of Washington’s plan to maintain its top-spot as the world’s only superpower even though its economy is in irreversible decline.

Goldman Sachs makes oil prices drop by Mikhail Leontyev 

Schedule of falling oil prices, adjusted in relation to the current fluctuations, has essentially been a straight line since last September, when prices fell from $ 50 per barrel to the current $ 29. What was so momentous that happened in the world market in September? In September, "Goldman Sachs" lowered expectations for the average oil price for 2016, assuming that it will drop to $ 20 a barrel. "Expectations" of "Goldman Sachs" were "whole-heartedly" supported by "Merrill Lynch", "Bank of America" and others.

There you have it - $ 20, quoted by "Goldman Sachs", was not a forecast. It was the target. Only our own Ministry of Economy is the one that makes forecasts, "Goldman Sachs" , on the other hand, makes the markets. The oil market - is not the market of raw materials. Supply contracts for actual oil makes only 2% percent of the market, the rest - speculative securities, futures and other derivatives. Prices for futures are not determined by supply and demand, but by "expectations". The futures market is completely controlled by the largest US banks. This is the market of expectations, which creates a real "Industry of expectations" using the notorious rating agencies, "independent" experts and the media.


wizteknet's picture

20$ barrel bushit start war 80$

Montgomery Burns's picture

Not sure it matters much in Mexico. Reg unleaded in southern baja still 2.30 something a gallon. All gasoline sold in Mexico is sold by the mexican govement ( Pemex) so they can charge whatever they like/ need .

Bankster Kibble's picture

+1   I was gonna say 'US State Department is trying to punish Russia again" but your link to Voltairnet beat me to it.

Kirk2NCC1701's picture

And still Putin seems unwilling or unable to back up his "Asymmetric Responses", much less take "Asymmetric Proactive Actions".

Unless and until the BRIICS, Venezuela, Nigeria, etc. completely decouple from USD in oil sales, and bypass SWIFT, they will continue to be financially sodomized and snuffed.

Of course self-serving and two-faced countries like China and India totally benefit from the rape & pillage prices for PM and Oil, in this Diabolically clever Divide & Conquer strategy.

Kefeer's picture

The Saudi's will depeg from the dollar and Russia, China and the Saudi's will determine price.  Wait and see.

SillySalesmanQuestion's picture

Maybe Apple can come up with an oil powered i-thingy, since we are all using less oil..."Tim Cook on line two."


lasvegaspersona's picture

Just completed another AR15 from spare parts. I'm going to the range to test it. You guys keep an eye on things. OK? I'm just drained after yesterday. If the world needs my attention to function it is finished.

commie's picture
commie (not verified) Jan 21, 2016 2:43 PM

The end game is the elimination of Pootin. He is a rogue president who runs his country as a criminal enterprise, killing any dissadent voices. The average Russian is too dumb to see that. 

V for ...'s picture
V for ... (not verified) commie Jan 21, 2016 2:49 PM

That is politics, a bankrupt thing. Silly boy.

Pareto's picture

The average Russian is too dumb to see that.


"dissadent" - fuck.


you got that right!

perkunas's picture


Its not just the Russians, there is enough stupid people here. Here's a guy who worked his way up in the KGB is east Germany. He got to where he is today, by killing and torturing people. His theft of the Russian economy is unparallelled in history. Bill Browder, once the largest foreign investor in Russia, estimates Russian President Vladimir Putin's wealth at $200 billion — which would make him by far the richest man in the world. This man needs to go to jail for what he has done, or just let the people who had their finger nails pulled out by him, spend some quality time with him.


walküre's picture

Angela Merkel was ex Stasi. Code name "Erika"

How come she is been German's chanellor x times in a row? Now Germany is imploding the EU.

Stasi was a CIA product to undermine KGB and SU.

V for ...'s picture
V for ... (not verified) Jan 21, 2016 2:46 PM

Check out HK derivatives linked to oil. Kaboom!

pocomotion's picture

The tax payers could be on the hook for the oil derivatives, so what's the big deal?   LOL

katchum's picture

All in all you didn't lose anything, it's just the premium normalizing.

El Viejo's picture

Ellen Brown - Depositors die and banks live…  (24 min) (She also has an interesting view on cheap oil here.)

JohnGaltsChild's picture

.....and history continues to rhyme.

me or you's picture

As long as US and UK keep ruling oil prices Rusia will be in a bad position. 

headhunt's picture

The markets control oil prices, the US and UK can nip around the edges but energy is too massive and necessary for anyone to really control pricing.

Russia is in a bad way because they they make little anyone wants.



poland spring's picture

Saw this:

Barclays Issues Investor Guidance on OIL ETNs Business Wire via CMTX - Wed Jan 20, 1:35PM CST

Barclays Bank PLC ("Barclays") announced an investor guidance notification today regarding the iPath(R) S&P GSCI(R) Crude Oil Total Return Index Exchange Traded Notes (the "ETNs"). The ETNs currently trade on the NYSE Arca stock exchange under the ticker symbol "OIL".

Recently, a material premium has developed in the trading price of the ETNs on the exchange in relation to their intraday indicative value. From January 1, 2016 to January 19, 2016, the closing indicative value (also referred to as the daily redemption value) decreased by approximately 30% from $5.67 to $3.95 per ETN, while the closing price of the ETNs on the exchange decreased by only approximately 11% from $6.26 to $5.58 per ETN. The closing price of the ETNs on the exchange as of January 19, 2016 reflected a 41% premium to the corresponding closing indicative value.

Due to the current market dynamic in the sale by the issuer of ETNs from inventory, there are likely to be continued fluctuations in this premium if strong interest from exchange participants in purchasing the ETNs continues.

Investors considering any purchase of the ETNs should be aware of the fact that the intra-day market prices of the ETNs on the exchange could be significantly higher than the intraday indicative value of the ETNs as calculated with reference to the level of the underlying index, minus an investor fee.

The secondary market premiums for the ETNs have been volatile, however, and investors should not assume that the ETNs will continue to trade at a premium in relation to their intraday indicative value.

The ETNs are riskier than ordinary unsecured debt securities and have no principal protection. The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. An investment in the ETNs involves significant risks, including possible loss of principal and may not be suitable for all investors.

walküre's picture

JPM said they see $70 oil by year end.

What do they know?

Panic Mode's picture

These arseholes jerking out BS hoping some suckers to take their losses. All investment banks are holding a lot of oil companies junk bonds.

lakecity55's picture

They know they and their buds will have scooped up everything on the cheap, then Oil will begin to rise....

s2man's picture

I've been getting ads in my browser, today, for Oil Penny Stocks.  LOL.  Aren't they all?  I'll wait until they get to .25 pennys...