"...I worry about a whole world that sets up for low volatility when you've got a new administration that is almost unquantifiable...and it reminds me a lot of the portfolio insurance stuff around 1987..."
European stocks halted two days of declines, with the Stoxx 600 fractionally in the green and Italy’s bonds climbing after Monte Paschi requested a bailout and Italy pledged to provide support for its other ailing lenders. S&P futures were little changed among extremely thin volumes while Chinese stocks dropped amid concerns on higher borrowing costs.
"We shall buy both February WTI and Brent upon receipt of this commentary… a “unit” of each being more than sufficient… happy to be buying it nearly $2/barrel below the highs of yesterday and as the markets are “correcting” that initial panic buying." - Dennis Gartman
The overnight exuberance in crude oil futures markets has faded notably as the day has worn on. While news of supply cuts are unquestionably bullish (should one choose to believe it or not, remember the Saudis admission "we tend to cheat"), but the last few days have also seen a plethora of bearish-biased news that for now is being ignored.
“Right after OPEC, U.S. producers were very active hedging," said Ben Freeman, founder of HudsonField LLC, a boutique oil merchant with offices in New York and Houston. "We are going to see a significant amount of producer hedging at this levels."
OPEC has once again succeeded in jaw-boning the oil market, and Goldman Sachs hiked its oil price forecast this week by a substantial amount, but the optimism has not trickled over into the oil futures market, at least not yet as the contango'd curve still does not look very good.
After a day of frenetic OPEC headlines being all that matters, oil traders may briefly focus on fundamentals as API reports an unexpectedly large build in gasoline inventories ( +2.68mm vs 900k exp). Overall crude, cushing, and distillates saw inventory draws which left wti slightly lower post-data.
Oil majors in northwest Europe have booked tankers to store 9 million barrels of oil as the international supply glut grows in size, according to a ship-operator who spoke to Bloomberg. The companies have resorted to using tankers as storage as signs emerge that onshore storage is filling up on the land-starved continent.
In the 1980s, the Fed decided that economists had learned sufficiently from the grave, global mistakes of the Great Inflation such that they would compensate for the evolution of money by controlling just a single interest rate. It was, essentially, an underpants gnome schematic: "1. Target federal funds rate. 2. .... 3. Control Economy."