Uncertainities are hitting us everywhere, can we handle these risks?
Do we understand beta? And i'm not talking about the securities market. I dunno how many of us can relate the rising commodity prices to the pressure its putting on households. I did after staying home for a while, (no) thanks to swine flu, one of the many uncertainities plaguing our country and the world.
So many things are happening together and that too in this all important year particularly for me.
By the way today is our ex PM Late Shri Rajiv Gandhi's B'day. Some ministries conceptualized by him thanked him in the national dailies and justified their existence. Didn't sound very convinvcing to me, i.e only their explanations e.g Food Processing Ministry, gave a bunch of pfaff about how they're helping the nation without listing any major milestone they have achieved or are going to in the near future.
Coming back to the main topic. After summers my interest in crude has surprised even me and not without reason, its been behaving quite oddly too. Probably because i follow it only now that i find it so ridiculous. Commodities like currencies seems so similar in their fluctuating nature. Though trading helps in price discovery but the exposure to speculators is an age old malady faced by all markets. There's no solution to this and all of a sudden i feel so disillusioned now that i'll just shelve this post now. But before that let me ask the question that I had in mind.
WTI Nymex spot crude was trading at $66 whereas North Sea Brent was at $70 yesterday. How do you explain that? And today in the commodities report US crude inventories are down by some 8.4m barrels. Rumour is that with lesser spot price at Cushing its bound to attract lesser volume. Its confusing but i'll soon find out why such a disparity exists.
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2 comments:
wti trading at lower than brent is a short term anomaly, something to do with inventories, not with demand surely. maybe something to do with september contract expiring yday. or just one off cos of tanker arrival problems..thr was a similar price diff in july cos of tanker inspections!!
huge draw down of stock--http://www.ogj.com/index/article-display/5168021576/s-articles/s-oil-gas-journal/s-general-interest/s-economics-markets/s-articles/s-market-watch__large.html
http://www.downstreamtoday.com/News/ArticlePrint.aspx?aid=16068
Regarding the big drop of 8.4m bbl, that is mostly due to drop in imports. expecting further price rise companies've started storing crude in offshore tankers..even JPMorgan is storing in a VLCC offshore..that too refinde, not crude. it is v difficult if not impossible to correlate price with volume in commodities
It did appear to be only on that day, WTI had caught up with Brent yesterday itself but FT coming with a huge blog regarding this anomaly warrants a closer inspection and hence my concern. There were a few earlier reports about lesser trade volumes reported of WTI and Brent than the sour ones at Dubai,Singapore etc. due to Opec cuts.
While they're expecting a further price rise but it was heavily speculated that all the floating crude had been dumped into the market taking the price to $59 around a month back and a backwardation was on the cards with the spot topping the futures for a while.But now its reverted to a very small contango, out of which only the big players (if at all) can extract some benefit. The marked shift in storage of refined products(mainly diesel) instead of crude was expected due to the onset of winter and hence a rising demand but that has not been so till now, hence this should soon be on its way out. Commodity futures, as we saw recently, can be easily cornered by rogue traders and thus be made to behave out of step with volumes and inventories. Its very difficult to spot such game at play and predict which is manipulated and which is not.
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