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Blue Lacy Advisors, LLC - End of August Crude Oil Market Commentary

Minneapolis, MN | September 12, 2022 | By: Steve Sinos, Blue Lacy Advisors, LLC

Brent has now twice dipped into the low $90s while WTI went so far as to test $85. On subsequent rallies, backwardation widened. Brent’s strip ended the week at ~$93.61, with the front of the curve pushing up $4.27 WoW while the back was virtually unchanged. Volatility is expected to remain at the front of the curve, accounting for as much as 25% of the upcoming week’s volatility. The average backwardation of the curve reached $1.40 on Friday’s settle, the first meaningful expansion of backwardation in more than a month and the highest average spread since the end of July. The rebound wasn’t enough to turn standard trend models bullish, but it substantially reduced the models’ bearish tilt. Chai’s model’s trend influence has contracted from calculating a drag on prompt crude of nearly $1/bbl to near flat. At the same time, our internal model’s bearish tilt has contracted to about 20% of its peak. A rally toward $105 would likely turn both models positive. In line with these trends, the types of speculators traditionally assumed to ride these waves returned to the market last week. An additional ten money managers recorded length on ICE the previous week. As a result, the net number of long traders has turned to one long trader after four consecutive weeks of short traders outnumbering long. The net position moved long by just ~7.4k contracts because speculators from the Other Reportable Traders category added substantial short positions, offsetting these additional long traders.

*This summary is based off August 31, 2022

A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!


Meet the Author!

Phone: +1-832-413-3124

Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.

He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.

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