tag:blogger.com,1999:blog-34323687.post273100699047483585..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: Achtung, Kapitan!Macro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-34323687.post-7959413781121430312015-09-08T14:58:26.158+01:002015-09-08T14:58:26.158+01:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/18262315848179799521noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-19976337703904610992015-08-27T12:32:01.995+01:002015-08-27T12:32:01.995+01:00The shale patch is in bust mode, following a boom ...The shale patch is in bust mode, following a boom brought about by years of easy money. Soon it will be over and done for good as the banks redetermine credit lines in the next couple of months. Half the rigs have been laid down in the big three shale basins. Most of the rest will be rusting away in the yards by the end of the year.<br /><br />RossmorguyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-61582185826940643852015-08-27T02:53:33.183+01:002015-08-27T02:53:33.183+01:00Chinese law limits individual money transfers of $...Chinese law limits individual money transfers of $50,000 every year, but underground banks have thrived as a channel to send money out of the country. These activities now pose a threat to China's "financial safety" and foreign exchange regime, said Meng Qingfeng of the Ministry of Public Safety.<br /><br />http://www.telegraph.co.uk/finance/markets/11824478/Black-Monday-fears-come-back-to-spook-panicked-investors.html<br /><br />this could take the bid out of Pacific Rim real estate...... Mr Wong the telephone bidder appears to have been cut off?<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-21296365260929862422015-08-27T00:16:34.605+01:002015-08-27T00:16:34.605+01:00Anon1000 says: However the underlying tech has not...Anon1000 says: <i>However the underlying tech has not changed and will always put shale at the q3/q4 on oil cost curve.</i><br /><br />I just don't see this. I understand that there are a lot of moving parts, that some acres are richer than others, but the underlying technology did not even exist a decade ago, and continues to improve in what looks like pretty dramatic fashion. It's not just the drilling (although there are huge advances being made there as well), but the geology and the tinkering with the idiosyncrasies of each field and whatnot. Then you have improvements from the other side in the form of increasing realizations as gathering and takeaway infrastructure gets built to support the new wells & fields. Now maybe I've been reading too many company presentations and not enough 10ks, but the story appears compelling.<br /><br />When you look at multi-year production by country, its pretty clear that the resurgence of the US is driving higher global production levels. Put another way, ex-shale the peak oil guys were basically right. What changed was a real technical breakthrough in production (perhaps facilitated by higher prices and low rates), but the market has become much more of a technical arms race then it was 10 years ago. Now who's going to win in that fight - the US or Angola? Venezuela? Iraq? Petrobras?<br /><br />From the perspective of the investors who <i>keep giving them more money to burn cash digging more wells</i> the US companies look like better credits in many ways to me than getting involved with Venezuela or Iran. Many of the giant overseas fields are basically only able to produce via the <i>good graces</i> of the western supermajors who do the work anyways, sometimes getting jerked around plenty by local governments anyways. I suspect that given the curves, the future of many of the global fields etc, the supermajors will also see full-life value in US unconventional production.<br /><br />I think a lot of this discussion starts with a look at the horrowshow of their FCF, but those budgets were made with $100+ oil. If next year we are looking at FCF neutral isn't the tenor of the conversation going to change a lot - from <i>going concern</i> to essentially a perpetual call on higher prices and increasing efficiency?<br /><br /><br />Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-3724224325202185542015-08-27T00:09:48.375+01:002015-08-27T00:09:48.375+01:00Noitce $VIX still closed over 30...& still 6.7...Noitce $VIX still closed over 30...& still 6.7 over September. If you plan on shorting VIX products, better hope we don't go down big againAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-84987443713514014982015-08-27T00:04:56.297+01:002015-08-27T00:04:56.297+01:00Western Canadian Crude Oil Stockpiles Rise to a Re...Western Canadian Crude Oil Stockpiles Rise to a Record Level at 27 million barrels<br /><br />http://www.wsj.com/articles/western-canadian-crude-oil-stockpiles-rise-to-a-record-1440620677<br /><br /><br />Western Canada Select closed today @ $23.85 <br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-25602844839166648342015-08-26T22:23:00.591+01:002015-08-26T22:23:00.591+01:00Thanks for indepth reply, it is hard to get balanc...Thanks for indepth reply, it is hard to get balanced coverage and good understanding of the industry if you are not involved on a day to day basis. It follows from your comment that the strategy is actually working and there is no reason for the reversal. One thing to note though is the tendency to overreaction, which might lead to some form of action from OPEC in the near future. Saudi did go silent since the oil at about 60.Nicknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-80478004284256958332015-08-26T22:00:29.178+01:002015-08-26T22:00:29.178+01:00Nick, I am bullish oil but for the opposite reason...Nick, I am bullish oil but for the opposite reason. Shale oil does not work at 30 bucks, it barely works at 60. Most shale companies keep producing by the good graces of their investors who keep giving them more money to burn cash digging more wells. The shale industry would barely exist if Capex was more accurately labelled as opex. When EOG trades at $45 then the shale shakeout is complete and you know money will be invested in wells when it makes economic sense, this could happen at current or much higher oil prices.<br /><br />Most of the cost improvements are just what u normally get when theres an oversupply of equipment and labour - 20+% across the board easy. However the underlying tech has not changed and will always put shale at the q3/q4 on oil cost curve. Some companies have arbitrarily boosted EUR's just to goose net income whilst others have increased frack stages to show a high 30day IP but subsequent declines have been agressive. There is lots of BS said in this space. Im bullish oil medium term because most new supply (outside iran and Iraq) such as shale and offshore needs 80-100 buck oil to be truly economic so I believe the range should be 50-100 bucks (50 to choke off shale and 100 to ramp it up)<br /><br />I would speculate the Saudi's were surprised that investors handed over $50bn to buy securities in H1 from shale companies burning huge amounts of cash (particularly if you take out the hedges). I think Saudi will respond if there is a genuine demand issue. In the absence of that it would make sense for them to cut back later this year/early next year after the borrowing base resets on shale co's although perhaps they aren't that microAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-73837536581484851172015-08-26T21:16:18.871+01:002015-08-26T21:16:18.871+01:00Another day of this and we are back in the ytd ran...Another day of this and we are back in the ytd range, things cool down and it gets chalked up as another late-summer low liquidity opportunity.Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-935564751382973832015-08-26T21:11:37.963+01:002015-08-26T21:11:37.963+01:00BTFD looks like it will be vindicated.BTFD looks like it will be vindicated.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-30292517545724479502015-08-26T20:48:54.406+01:002015-08-26T20:48:54.406+01:00T - I agree with the other poster (anon) who comme...T - I agree with the other poster (anon) who commented vix may stay elevated for a couple of months - to me that means a 20-35 range instead of a 12-24, but others may disagree - that said, I can't imagine the theta bleed for punters if this market doesn't go anywhere much in the next few weeks - I know that seems impossible to imagine after what we just went through, but its actually more normal to markets to consolidate after moves like these than to continue slashing their wrists on a daily basis.washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-89700701176790141012015-08-26T19:51:15.045+01:002015-08-26T19:51:15.045+01:00I'm surprised VIX is still north of 30. I may...I'm surprised VIX is still north of 30. I may be consistently underestimating the legs of this pullback - the themes people are talking about just don't scare me yet. It's great how easy it is, and how many choices one has, to express a short-vol sentiment these days.Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-71287609509286643412015-08-26T19:44:57.190+01:002015-08-26T19:44:57.190+01:005y5y BE's seem to be slightly more alive now, ...5y5y BE's seem to be slightly more alive now, XLT is barely off the ground, XOM is fighting, let's see if this continues and spills over to oilNicknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-70023648361847017342015-08-26T19:26:28.881+01:002015-08-26T19:26:28.881+01:00Thanks washedup - the simple way is just to buy Ch...Thanks washedup - the simple way is just to buy Chicago soybean oil futures, they are liquid. There is a component of beans availability and crop size in this trade but at current levels it is probably not that significant.<br /><br />Slightly more complex way is to buy soybean oil futures and sell soybean meal futures - this is something called "oil share", oil and meal being the products of soybean crush. This helps to mitigate soybean price link and dependence on crop size.<br /><br />Meal does have very different demand structure to oil, with heavy exports which so far are well behind last marketing year's pace. Oil share might work better but could be much more volatile position to hold.<br /><br />At the end of the day right now it comes down to gasoil price, and so far being long soybean oil or oil share was a very painful experience.<br /><br />But hey, S&D are important.Nicknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-59252154812902872992015-08-26T19:11:31.014+01:002015-08-26T19:11:31.014+01:00Nick - as much as energy fundamentals focused guys...Nick - as much as energy fundamentals focused guys (I, and presumably u being one of them) would like to think that all that stuff matters, in the short term the only factor that matters for crude flat price (not spreads) , is whether macro punters require a deflation hedge or an inflation proxy. 5 yr/5 yr BE's move first, then XLE (the energy basket), and finally crude gets off the mat, thereby making it all a nice wonderful self fulfilling feedback loop in both directions - we have already seen that autocorrelated madness twice this year, and we will probably keep seeing it in the future.<br />Good luck - I do like your soybean idea but don't know how to play it.washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-55377757807426085682015-08-26T19:01:56.635+01:002015-08-26T19:01:56.635+01:00Thanks, washedup, now the question is what is goin...Thanks, washedup, now the question is what is going to push oil higher from here: short covering on any random spike that will carry trend followers out (selling is relentless so far); Saudi reversing course (somebody would have to take the fall for that blunder); China still being on the map and buying consistently over (they probably will but that's nothing new)? Why would we turn here?<br /><br />Another interesting market to look it is vegetable oils: palm, soy, rape (canola) and sunflower. All of them have own internal dynamics but all of them are hit through weak gasoil price and lack of biodiesel demand. Palm will move once gasoil turns. But even more interesting is soybean oil: it is a domestic market in US, with minor exports, stable internal consumption in food and industry and biodiesel demand guaranteed through EPA RFS mandate.<br /><br />Mandate would probably be increased in November if EPA confirms the current proposal, and as for exports US is cheaper and more competitive than Argentina and Brazil, so bound to capture some market. Even in 2008/2009 with gasoil trading lower soybean oil did not go to the current levels. In the absence of extreme positioning my guess is it shows the power of market maker models / trend followers. Supply and Demand will have an upper hand though sooner or later.<br /><br />Here we go, some colour from ags world.<br /> Nicknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82879367269696780682015-08-26T18:42:45.700+01:002015-08-26T18:42:45.700+01:00Nick - all that bearish stuff is quite well known,...Nick - all that bearish stuff is quite well known, and we are reminded of it about 500 times a day - supply will not go down I fully accept it and have been a proponent of the idea for a long time.<br />Here is what's not getting enough attention - US oil demand, especially gasoline, is REALLY strong - I initially faded this, but 3 quarters of data has been enough to convince me that there is more price elasticity than I initially thought - I have been in energy for 2 decades and the last time I saw this kind of % YoY growth was in 2003, and it was in CHINA!<br />It is a bit of a head scratcher - this was not supposed to happen, but it gives me some pause on the 'we are going straight down to $20' view that I initially espoused. I have been wondering if crude is a 35-50$ long run product and not $20-35.<br />washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-8803655195153776342015-08-26T18:30:32.807+01:002015-08-26T18:30:32.807+01:00German GDP. Internals not so great:
@edward_hugh ...German GDP. Internals not so great:<br /><br />@edward_hugh tweets <br /><br />German Q2 GDP largely a net exports story (added 0.7 pps) to 0.4% headline growth. Total domestic uses -0.3 pps. <br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-44575186570898137742015-08-26T18:15:47.066+01:002015-08-26T18:15:47.066+01:00It has been pointed out to me that since we are he...It has been pointed out to me that since we are heading into refinery maintenance period, US crude consumption will take a hit of about 1.5 million barrels a week for at least 4 week. While today stock numbers were surprisingly low, especially relative to expectation, the reduction came from low imports and not from reduced production. Hence it is hard to see oil going anywhere but lower until the seasonal demand improves and/or US production takes a hit.<br /><br />Nevertheless I can’t shake out form my head the idea that OPEC did completely misjudged the situation and propensity of free market enterprises to survive becoming more efficient and cutting costs. US shale producers will be just fine at oil any level of price that the market can sustain in a long run, be it 30, 60, or 90 USD. While Saudi Arabia as a country / nation can be considered as one massive oil Co with major costs that could not be reduced. Those are not the fixed and variable costs of oil extraction but the cost of keeping the population relatively content and extending the country influence in the region. The reports of budget cuts initiatives are sound bites not more.<br /><br />The risk for any oil producer nation or the company is not the reserves or the price but simply the potential that will soon become the reality of cheap alternatives and improved efficiency of any energy utilising mechanism. Taking this into account the optimal strategy would be to maximise the revenue through price and not volume. There is no point in taking 50% revenue cut for marginal increase in market share.<br /><br />OPEC and Saudi probably understands this point by now, the gamble failed, time to move on and try a different strategy.<br /><br />That makes me bullish in the face of negative seasonality, potential demand issues or increased US production (actually if anything increased US production while prices are high might help OPEC to mitigate the impact of US export ban abolition or even aver it altogether).<br /><br />On the other hand the tape is heavy, and the people a banding around a lot of low price levels.<br /><br />Anyway, once always has to have a view and my view is long.<br /><br /><br />Nicknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-43352070582452049672015-08-26T17:42:29.770+01:002015-08-26T17:42:29.770+01:00hey wash/T same page on oil - i only dipped a toe...hey wash/T same page on oil - i only dipped a toe yesterday LONG at close so today i was only selling a long, not shorting (absolutely no way). Call it premature ejaculation it distracts me from equity index swings ill have to book energy trades somewhere else . I am super bullish on oil and already long bovespa futures (Brazil) as a proxy of all things EM/oily. Nicohttps://www.blogger.com/profile/06532015745155347229noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-17882622035531999812015-08-26T17:29:01.249+01:002015-08-26T17:29:01.249+01:00"one issue doing the round is the dispute wit..."one issue doing the round is the dispute within EU on how to absorb and 'allocate' 4 million Syrian refugees"<br /><br />EU per capita income of $35,000.<br /><br />That's a $140 billion hole to fill if per capita income is to stay constant.<br /><br />Fail.<br /><br />What did Aldo Rain say?<br /><br />Grat-zeeee.<br /><br />Danhttp://nwzpaper.comnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-77405523898802299982015-08-26T17:17:26.352+01:002015-08-26T17:17:26.352+01:00T - other than the fact that nico the master timer...T - other than the fact that nico the master timer doesn't like it, I can't find anything negative about oil fundamentals in the short term other than sentiment and general hatred - mind you I have been bearish commodities for about as long as I have been posting here - I don't know whats the tail and whats the dog, but either bonds are on drugs to be getting sold in the last two days, or inflation expectations may have reached a short term bottom - the last time that happened crude turned and rallied about 30%. washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-62835594572895426222015-08-26T16:48:47.339+01:002015-08-26T16:48:47.339+01:00...and the VAR models in banks will be impacted fo......and the VAR models in banks will be impacted for the next two years so expect prop trading activity to diminish accordinglyNicohttps://www.blogger.com/profile/06532015745155347229noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-10706705637619130372015-08-26T16:44:54.574+01:002015-08-26T16:44:54.574+01:00VIX and VVIX levels and intraday movements continu...VIX and VVIX levels and intraday movements continue to suggest MKT will need weeks to settle down - maybe monthsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-46648451467306149392015-08-26T15:59:21.380+01:002015-08-26T15:59:21.380+01:00i sold oil today (already) the tape is far too hes...i sold oil today (already) the tape is far too hesitant for my taste. Some steady selling into the last 60mn on european equities we are really not out of the woods yetNicohttps://www.blogger.com/profile/06532015745155347229noreply@blogger.com