*Sell Navarro, Buy Trump*
The age-old trader saying of buy the rumour and sell the fact has a new variation in the market today. This centre’s around the confusing events of the US President and his trade advisor Peter Navarro. Navarro told Fox News in an interview that the trade deal with China was ‘over’; the situation had to then be clarified by the President who said that the deal was ‘fully intact’. Confusing, I know. Just check the Brent chart.
*Russia’s Done Big Cuts and It Cannot Lie*
Russia as one of the largest oil producers in the world has been cutting exports to multi year lows. Crude shipments from Russia’s Baltic and Black Sea ports are set at about 880,000 barrels a day in the first 10 days of July, or to put it another way, the lowest since at least 2008 if it continues to the end of the month. The resultant effect is that Russia’s grade soared to a premium of more than $2 a barrel to the Dated Brent benchmark last week, compared with a discount of about $4.50 during oil’s collapse in April.
*Hedge Funds Taking Profit?*
Money managers reportedly sold the equivalent of 16 million bbls of oil related futures and options last week. Reuters notes that ‘sales were concentrated in NYMEX and ICE WTI (-24 million barrels) while funds were small buyers of Brent (+2 million), U.S. diesel (+2 million) and European gasoil (+5 million), leaving U.S. gasoline unchanged.’ There are currently bearish bid/offer ratios in Brent, US gasoline and European gasoil, and more starkly in US diesel, which does indicate that we could be entering a corrective phase.
*Sign of Aviation Recovery*
Discounts for aviation fuel have narrowed this week with increasing demand for fuel as the number of flights worldwide recovers. We previously noted that flights were still down some 70%, but with the easing of lockdown measures and the creation of ‘airbridges’ between certain countries, airlines are looking to increase passenger traffic. This is not only good news for holidaymakers, but has also lifted front month jet spreads, as well as jet cracks. That being said it could still be a long time until demand recovers close to pre virus levels.