MBCC Trading Highlights 18th November'22 - Commodities trade on reality, Equities trade on hope - which one would you trust? Well if you don't know...follow the Alpha!
An interesting fact is that despite the Commodity bulls out there calling for tighter Oil, seeing Oil prices now FLAT for the year, we have erased ALL Of the gains of 2022, yet as you can see in the chart above, Oil Equities are up 50% for the year!! Clearly there is a HUGE disconnect as usual Equities trade on “hope” and Commodities on actual physical market settlement as with the latter you either have it or you dont. We know price can even go to negative. But Equities are long term discounting instruments, right now no one expects Oil to break < $90 as feel OPEC is there to cut. OPEC can never manage in a market that is seeing demand weakness, they are just good at manipulating prices/market when supply is tight as they know they are the ONLY swing producers at that time. It is a narrow window and since US Shale has been slow, they have been moving the needle as they deliberately brought the 10 mbpd of Oil slowly back in dribs and drabs after the Covid lockdown. It suited them of course, after all their economy depends on it.
So if one is really bullish Oil, then it would be much better value add to buy the Oil itself right? But Oil is not going up either!
At the end of the day, Oil equities earnings are driven not about what you “think” Oil is or “should” be, it is about what Oil really is!
Today we discuss what we see in the actual physical markets, and of course Equity analysts are always 6 months behind the curve!
Also we look at why the market is “pinned” to 4000…for now….never underestimate the power of derivative positioning as that dictates futures and gives one the illusion of strength or weakness.
We break it all down as we see cross asset discrepancies everywhere - they ALWAYS converge! Sign up to find out, we know no one else breaks macro, cross asset and real fundamentals the way we do.
Why are we sharing? Well to hopefully encourage you to sign up as we show you how we stand out in our analysis using all our tools to tell you where the trade is, saving and making you $$ ! Ignore all the noise.