Energy Cable #47: Price always leads narrative
Happy Monday to everybody from a cold and rainy Copenhagen. We are now long crude oil again as we find the narrative too bearish given the fundamentals.
Before we start to talk about our crude oil case, we would like to highlight the volatility in post covid energy markets and how these have benefitted sellers in the futures markets more than buyers keeping storage costs constant.
For Brent crude a 3rd position futures contract rolling down (or in this case mostly up due to backwardation on average) to become 1st position was expected to almost return a 0% loss/gain pre covid, while it now on average will return a buyer around 10%.
Chart 1: Uncertainty means it is a buyers market in crude oil