Summary of Current Market Conditions



  • Hydrocarbon prices rose over the weekend.  NYMEX crude oil up $0.30 to $55.94 per barrel; ICE Brent up $0.41 to $62.48 per barrel; NYMEX natural gas up $0.086 to $3.070 per mmBtu.




  • Thus far this Monday morning crude oil prices are firming modestly in a follow-through to Friday’s gain, reflecting the new consensus view of a “tightening” market as well as word of the princely purge in Saudi Arabia.  In terms of the latter, we are somewhat surprised that oil prices are not rising more, given the “traditional” knee-jerk reaction to any surprise political developments out of the Kingdom, but perhaps the market is assuming, correctly in our view, that Crown Prince Mohammed bin Salman has no intention at this point of revising Saudi oil policy.


  • To put current prices into perspective, in our November 1 report we stated, “We also estimated where CFTC-reported Managed Money might now stand at $55.00 per barrel, using the last two weeks implied price gain per reported increase in futures-only net length.  If the relationships of the last two reporting periods held over the past week, it would imply that futures-only net length now stands at about 316,400 contracts.  If so, this still lies short of the record of 405,328 contracts set on February 21 of this year.  Taking the exercise further, if the relationships we devised are reasonable and funds take futures-only net length up to the February 21 record, it would imply that the December NYMEX crude oil contract would reach about $62.45 per barrel.


  • As our table below reveals, on October 31 when the prompt NYMEX crude oil contract settled at $54.38 per barrel, Managed Money futures-only net length stood at 295,232 contracts, so it looks like our arithmetic was almost dead on the mark.  More importantly, however, if we perform the same exercise with the data between October 24 and October 31, it would imply that the record would now be matched at “only” about $58.20 per barrel.

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