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CNBC Guest Blog
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Stephen Schork
Editor of
"The Schork Report"
ICE Brent Weekly Trend… Spot contract up, deferred contracts up more. For a sixth week in a row, bullish momentum in spot crude oil in London stalled in the low/mid $50s. In fact, last week momentum stopped 1 penny shy of the previous week’s 53.06 high print. On the other hand, bearish momentum stalled 9 cents above the previous week’s 48.31 low print. As such, this is still a Goldilocks market, i.e. it’s not too bullish, but it’s not too bearish.
The Schork Report is still holding our bias and will not change until we see this market break out of the current range in between the low/mid $50s and high/mid $40s. We said it in last week’s issue, but it bears repeating… if you are bearish (and fundamentally we are) you then have to be wary of a market that rallies in the face of bearish news. On the other hand, the contango on the ICE increased last week.
The overall tenor in last week’s economic news was negative, but it was less negative than what we have grown accustomed to. In other words, the rate of change to the economic decline is slowing. As such, equity markets, which generally foreshadow expectations six months in advance, are surging.
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This surge is pulling crude oil, but not natural gas, higher. For instance, per last Wednesday’s DOE report, total U.S. supplies of crude oil and petroleum products rose to the highest level, 1.796 billion (×109) barrels, since at least 1982, as far back as the DOE provides weekly data. On top of this, demand held near post 9/11 lows.
As such, the second derivative mantra has been enough to encourage a bid in the front of the market, the second derivative of the slope of the NYMEX contango increased
by a nickel last week. Thus, it appears that a bid in the spot market is being encouraged as the equities move higher, but the shape of the forward curve still suggests weak nearby demand.
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Stephen Schork is the Editor of, "The Schork Report" and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.
Data is a real-time snapshot *Data is delayed at least 15 minutes
