Speaker 1: Interesting discussion coming up. Carly Garner joins US senior commodity
Speaker 1: strategist and broker at De Carli Trading. So with oil,
Speaker 1: we have this interesting sort of dichotomous movement here. The
Speaker 1: oil price has fallen quite dramatically on the complicated reopening
Speaker 1: in China, just the thought that all these new COVID
Speaker 1: cases will delay the benefits from the reopening, while stocks
Speaker 1: have really bolted to the upside. I'm curious some which
Speaker 1: market is right or is it just the difference between
Speaker 1: kind of spot considerations versus futures. Well, I think we're
Speaker 1: we're looking at a situation where market positioning is kind
Speaker 1: of driving momentum. And what I mean by that is
Speaker 1: a couple of weeks ago when oil test at seventy
Speaker 1: for the first time. On the downside, we had a
Speaker 1: couple of news events that the term prices pretty quickly,
Speaker 1: and that was the reopening of China and also the
Speaker 1: Biden administration refilling the spr and so there were a
Speaker 1: lot of speculators that stepped in and bought those levels
Speaker 1: with the expectation of h much much higher crew prices.
Speaker 1: I mean, we all know for last year or so,
Speaker 1: speculators have been looking for a hundred dollar plus oil
Speaker 1: and they haven't gotten what they've looked looked for, but
Speaker 1: they're they're willing to buy into those dips. And I
Speaker 1: think the fact that UM the rally fell short and
Speaker 1: kind of ran out of steam forced all of those
Speaker 1: those buyers out to the sidelines. And I think this
Speaker 1: probably continues. I think we've probably run some stops below
Speaker 1: seventy and test the highest sixties. But in the overall
Speaker 1: scheme of things, at this point, all the froth that
Speaker 1: was built into the market in the spring when oil
Speaker 1: prices went above hundred and much higher has really been
Speaker 1: wiped out. If you look at the COT report issued
Speaker 1: by the CFTC, speculators are holding the smallest net long
Speaker 1: position they've held in several years. And usually when speculators
Speaker 1: have thrown in the towel on oil, that's exactly when
Speaker 1: the trend changes. So I expect somewhere between sixty five
Speaker 1: and seventy to be a place for the bulls to
Speaker 1: get some footing. So coy that bings NY to say,
Speaker 1: why a haven't the oil price has gone Further's everything
Speaker 1: priced in? That's one part of my question. The other
Speaker 1: thing is OPEC likely to be happy? An OPEC clus
Speaker 1: likely to be happy with the prices as you're just predicting,
Speaker 1: and I'm saying, you know, if we don't look at
Speaker 1: the mean average, is it more case you're looking at
Speaker 1: the mode average of each member. Well, Um, one thing
Speaker 1: that I should point out is the China that comes
Speaker 1: back online is not the same China that went offline. Um.
Speaker 1: I think they're experience experiencing some economic weakness, kind of
Speaker 1: similar to if you look at the travel situation globally
Speaker 1: and especially in the US, it's just not as fun
Speaker 1: to travel in two thousand twenty two or twenty three
Speaker 1: as it was two thousand nineteen. So even as travel
Speaker 1: was reopening, it wasn't as robust as maybe some people
Speaker 1: had had assumed it to be. So I think you're right, Um,
Speaker 1: OPEC would love to see oil prices hold in the
Speaker 1: six seventy dollar area. If you look at a weekly
Speaker 1: chart for years now, almost two decades, seventy has really
Speaker 1: been a really significant pivot point. In fact, it's kind
Speaker 1: of been almost the line between bull market and bear markets.
Speaker 1: So this it's really important what happens here. But I
Speaker 1: do think that sentiment has gotten so weak and speculators
Speaker 1: are so sidelined that there's plenty of room for buying
Speaker 1: power of prices firm up. And I think that's what
Speaker 1: we're probably gonna eventually get after a few rough days.
Speaker 1: If oil at some point sends a level of of
Speaker 1: sort of prediction of recession, about what level for oil
Speaker 1: would that be? For instance, you're talking seventy, the bulls
Speaker 1: will come back. What if it falls down into the fifties,
Speaker 1: And that's not impossible. I don't think that's going to
Speaker 1: happen on this path. But if we're talking um a
Speaker 1: year or two down the road, absolutely we'll see those
Speaker 1: numbers again. And the reason being, I mean oil, um,
Speaker 1: it's a limited resource. But at the same time, we're
Speaker 1: getting better and better at pulling it out of the ground.
Speaker 1: So as long as politics get out of the way,
Speaker 1: we have plenty of oil to get. UM. It's just
Speaker 1: a matter of you know, time I'm going by and
Speaker 1: and things working themselves out. And we've seen the whale market. Um,
Speaker 1: the last trip we had up to a a hundred fifty
Speaker 1: dollars a barrel in two thousand seven ended in thirty
Speaker 1: dollar oil within a year or so, so anything is possible.
Speaker 1: And one thing I've learned about crude oil is it
Speaker 1: never puts in quiet bottoms or quiet tops. There's always
Speaker 1: lots of fireworks, so you want to be careful either way. Well,
Speaker 1: one commodity which is not to producing any fireworks and
Speaker 1: perhaps ought to have been, is gold. Given all the
Speaker 1: uncertainty and the risks we've had out then the last
Speaker 1: couple of years, are you surprised we have not seen
Speaker 1: it higher than where we it's And why is it
Speaker 1: not being seen as a haven anymore? What's the deal?
Speaker 1: You know? I agree with you, a pent I've been
Speaker 1: expecting gold to behave much better than it has. It's
Speaker 1: had a rough year considering the backdrop that is probably
Speaker 1: the best fundamental backdrop we've seen in gold almost ever,
Speaker 1: and it still couldn't get off the map. But I
Speaker 1: think that what was going on is the dollar was
Speaker 1: holding it down and there were still a lot of um.
Speaker 1: The idea you that maybe bitcoin is replacing gold was
Speaker 1: still floating around. I think that's probably dissipated. I think
Speaker 1: that's old news, and I think we start getting some
Speaker 1: hedging and investment dollars back into gold. Yeah, it could
Speaker 1: be that the dollar going down has driven gold up
Speaker 1: and uh and may help oil as well going forward
Speaker 1: because gold has gone from about sixteen fifty at the
Speaker 1: beginning of November up to eighteen fifty at the moment,
Speaker 1: so it's had a pretty good bounce here at something
Speaker 1: like fifteen percent or so. Anyway, Thanks very much, Carly
Speaker 1: Carly Garner, senior commodity strategist and broker at de Carly Trading.