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Markets Appear Rangebound as Traders Rebalance Their Books

Minneapolis, MN | November 28, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC


The data doesn't fully support the narrative blaming algos for the recent weakness in oil prices. Expect continued volatility this week as traders prepare for expiry.


Three Things


  1. Brent prices remain volatile, demonstrating ranges similar to 1Q2024 when bank failures dominated headlines. Combined with a softening structure, there are fears that specs are piling on bearish bets.

  2. COT data doesn’t seem to confirm this, at least not entirely. Specs, while still net-short, have moved longer by >90k lots of futures since the middle of October. The combined position has moved more than >60k net long, even as falling prices push put positions into higher deltas.

  3. This is all happening within the established range of $80-90/bbl, reflected in the options exposure, around which prices have consolidated in recent months. January goes off the board, but February and March appear similarly positioned, though with a wider GEX of $75/90.


Continued Volatility


Brent prices continue to demonstrate heightened volatility. Last week’s average daily range approached $3/bbl, nearly $0.20/bbl wider than the average range since Hamas attacked Israel, which is already >$1/bbl wider than the preceding two months’ average daily range. This level of persistent volatility mirrors daily range statistics observed during the first quarter of the year, highlighted by bank failures.


*This summary is based off November 19, 2023

 

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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