Thinking Out Loud - We Survived So Far, We Are Almost There
I thought this was the appropriate time to do a rant/vent/thinking out loud piece. This week was tough for some of you that are holding levered positions and for those of you holding cash, the recent uncertainty does not make it any better as you do not know when to deploy that cash. I think it's safe to say that the recent volatility in the oil market coupled with continued worries about the Fed has aided everyone's anxiety.
Looking at the developments this week, we had a few shocks/surprises/worries and relief in the oil market.
EIA's oil data remains bearish with total liquids building.
Crack spreads are falling over worries that demand is going to remain lackluster.
WTI fell swiftly to test the $73 to $75 support range and held.
Brent timespreads fell swiftly before rebounding to finish the week higher.
Russia's March production cut is going to be a monthly review as opposed to a one-time and done cut.
US economic data continues to surprise to the upside indicating the Fed is likely to keep rates higher for longer.
For me, market price action is everything so when I saw oil fell to the support region and held, that was a huge sigh of relief. More often than not, and as we've seen with the way timespreads trade, markets are always front-running the prospects of what's to come. We saw this with Brent's 1-2 timespread falling into contango in mid-November, which indicated to us at the time that Q1 was going to show builds. And with timespreads now back into backwardation, albeit at a low level, it indicates to us Q2 will be minor draws.