Overtime
Commodities
Good morning,
This week’s Overtime is a review of the commodities landscape.
Energy and oil markets remain front and center for the current environment, and started this week with a big bounce.
Today, we’ll cover the technical outlook for:
WTI and Brent oil
Natural gas and gasoline
Energy stocks
Precious metals and miners
Industrial metals
and agricultural commodities and softs
Oil markets
WTI starts the week with a bounce, but the worst is behind us
Crude oil bounced yesterday, but as outlined in the Playbook, last week’s break of $95/bbl. was the most significant development. I think an elevated trading range makes a lot of sense here, and am currently neutral if prices are between $80-$95/bbl.
WTI futures curve remains in steep backwardation, declines mostly seen at the front end
Versus this time a month ago, the December contract is down less than $3, while the May contract has declined nearly $10. Whether it is with front-month declines or longer-dated tenors rising, this curve has a long way to go towards normalization as contango, or an upward-sloping curve from lower left to upper right, is the normal state of affairs.
Brent oil has broken below $100
The European benchmark for oil has a similar pattern to WTI, breaking below $100/bbl. before finding support at the 50-day. I also see a trading range here as likely, with $80 also as the potential floor.
Brent-WTI spread elevated, but well below spike highs
