WEBVTT - Carley Garner on Commodities (Radio)

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<v Speaker 1>Interesting discussion coming up. Carly Garner joins US senior commodity

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<v Speaker 1>strategist and broker at De Carli Trading. So with oil,

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<v Speaker 1>we have this interesting sort of dichotomous movement here. The

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<v Speaker 1>oil price has fallen quite dramatically on the complicated reopening

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<v Speaker 1>in China, just the thought that all these new COVID

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<v Speaker 1>cases will delay the benefits from the reopening, while stocks

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<v Speaker 1>have really bolted to the upside. I'm curious some which

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<v Speaker 1>market is right or is it just the difference between

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<v Speaker 1>kind of spot considerations versus futures. Well, I think we're

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<v Speaker 1>we're looking at a situation where market positioning is kind

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<v Speaker 1>of driving momentum. And what I mean by that is

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<v Speaker 1>a couple of weeks ago when oil test at seventy

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<v Speaker 1>for the first time. On the downside, we had a

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<v Speaker 1>couple of news events that the term prices pretty quickly,

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<v Speaker 1>and that was the reopening of China and also the

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<v Speaker 1>Biden administration refilling the spr and so there were a

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<v Speaker 1>lot of speculators that stepped in and bought those levels

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<v Speaker 1>with the expectation of h much much higher crew prices.

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<v Speaker 1>I mean, we all know for last year or so,

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<v Speaker 1>speculators have been looking for a hundred dollar plus oil

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<v Speaker 1>and they haven't gotten what they've looked looked for, but

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<v Speaker 1>they're they're willing to buy into those dips. And I

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<v Speaker 1>think the fact that UM the rally fell short and

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<v Speaker 1>kind of ran out of steam forced all of those

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<v Speaker 1>those buyers out to the sidelines. And I think this

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<v Speaker 1>probably continues. I think we've probably run some stops below

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<v Speaker 1>seventy and test the highest sixties. But in the overall

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<v Speaker 1>scheme of things, at this point, all the froth that

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<v Speaker 1>was built into the market in the spring when oil

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<v Speaker 1>prices went above hundred and much higher has really been

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<v Speaker 1>wiped out. If you look at the COT report issued

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<v Speaker 1>by the CFTC, speculators are holding the smallest net long

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<v Speaker 1>position they've held in several years. And usually when speculators

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<v Speaker 1>have thrown in the towel on oil, that's exactly when

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<v Speaker 1>the trend changes. So I expect somewhere between sixty five

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<v Speaker 1>and seventy to be a place for the bulls to

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<v Speaker 1>get some footing. So coy that bings NY to say,

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<v Speaker 1>why a haven't the oil price has gone Further's everything

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<v Speaker 1>priced in? That's one part of my question. The other

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<v Speaker 1>thing is OPEC likely to be happy? An OPEC clus

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<v Speaker 1>likely to be happy with the prices as you're just predicting,

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<v Speaker 1>and I'm saying, you know, if we don't look at

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<v Speaker 1>the mean average, is it more case you're looking at

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<v Speaker 1>the mode average of each member. Well, Um, one thing

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<v Speaker 1>that I should point out is the China that comes

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<v Speaker 1>back online is not the same China that went offline. Um.

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<v Speaker 1>I think they're experience experiencing some economic weakness, kind of

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<v Speaker 1>similar to if you look at the travel situation globally

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<v Speaker 1>and especially in the US, it's just not as fun

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<v Speaker 1>to travel in two thousand twenty two or twenty three

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<v Speaker 1>as it was two thousand nineteen. So even as travel

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<v Speaker 1>was reopening, it wasn't as robust as maybe some people

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<v Speaker 1>had had assumed it to be. So I think you're right, Um,

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<v Speaker 1>OPEC would love to see oil prices hold in the

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<v Speaker 1>six seventy dollar area. If you look at a weekly

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<v Speaker 1>chart for years now, almost two decades, seventy has really

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<v Speaker 1>been a really significant pivot point. In fact, it's kind

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<v Speaker 1>of been almost the line between bull market and bear markets.

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<v Speaker 1>So this it's really important what happens here. But I

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<v Speaker 1>do think that sentiment has gotten so weak and speculators

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<v Speaker 1>are so sidelined that there's plenty of room for buying

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<v Speaker 1>power of prices firm up. And I think that's what

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<v Speaker 1>we're probably gonna eventually get after a few rough days.

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<v Speaker 1>If oil at some point sends a level of of

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<v Speaker 1>sort of prediction of recession, about what level for oil

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<v Speaker 1>would that be? For instance, you're talking seventy, the bulls

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<v Speaker 1>will come back. What if it falls down into the fifties,

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<v Speaker 1>And that's not impossible. I don't think that's going to

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<v Speaker 1>happen on this path. But if we're talking um a

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<v Speaker 1>year or two down the road, absolutely we'll see those

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<v Speaker 1>numbers again. And the reason being, I mean oil, um,

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<v Speaker 1>it's a limited resource. But at the same time, we're

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<v Speaker 1>getting better and better at pulling it out of the ground.

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<v Speaker 1>So as long as politics get out of the way,

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<v Speaker 1>we have plenty of oil to get. UM. It's just

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<v Speaker 1>a matter of you know, time I'm going by and

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<v Speaker 1>and things working themselves out. And we've seen the whale market. Um,

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<v Speaker 1>the last trip we had up to a a hundred fifty

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<v Speaker 1>dollars a barrel in two thousand seven ended in thirty

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<v Speaker 1>dollar oil within a year or so, so anything is possible.

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<v Speaker 1>And one thing I've learned about crude oil is it

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<v Speaker 1>never puts in quiet bottoms or quiet tops. There's always

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<v Speaker 1>lots of fireworks, so you want to be careful either way. Well,

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<v Speaker 1>one commodity which is not to producing any fireworks and

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<v Speaker 1>perhaps ought to have been, is gold. Given all the

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<v Speaker 1>uncertainty and the risks we've had out then the last

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<v Speaker 1>couple of years, are you surprised we have not seen

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<v Speaker 1>it higher than where we it's And why is it

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<v Speaker 1>not being seen as a haven anymore? What's the deal?

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<v Speaker 1>You know? I agree with you, a pent I've been

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<v Speaker 1>expecting gold to behave much better than it has. It's

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<v Speaker 1>had a rough year considering the backdrop that is probably

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<v Speaker 1>the best fundamental backdrop we've seen in gold almost ever,

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<v Speaker 1>and it still couldn't get off the map. But I

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<v Speaker 1>think that what was going on is the dollar was

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<v Speaker 1>holding it down and there were still a lot of um.

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<v Speaker 1>The idea you that maybe bitcoin is replacing gold was

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<v Speaker 1>still floating around. I think that's probably dissipated. I think

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<v Speaker 1>that's old news, and I think we start getting some

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<v Speaker 1>hedging and investment dollars back into gold. Yeah, it could

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<v Speaker 1>be that the dollar going down has driven gold up

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<v Speaker 1>and uh and may help oil as well going forward

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<v Speaker 1>because gold has gone from about sixteen fifty at the

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<v Speaker 1>beginning of November up to eighteen fifty at the moment,

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<v Speaker 1>so it's had a pretty good bounce here at something

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<v Speaker 1>like fifteen percent or so. Anyway, Thanks very much, Carly

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<v Speaker 1>Carly Garner, senior commodity strategist and broker at de Carly Trading.