Ole Hansen

“I think there's no doubt that even though the the market is behaving relatively benignly, especially if you're just watching front bonds, the futures price in the crude oil market, you were kind of just saying, what's the whole fuss about? But this disruption we're seeing right now is just so profound because it's not only the energy space that we are seeing being impact. And one thing is crude oil, but another thing is the old refined products where we're really seeing the the tightness right now, diesel, jet fuel, petrochemicals, and so on.”

“Simply because if you are a passive long investor, Eric, almost no matter how you invest into a commodity space, whether it's through an ETF or through a swap, whoever provides you the ETF for the swap will always go back to the clean market, and the clean market in this this case is the futures market. And if you have a market where which is backwardation, I. E. It's a signal of a relatively tight supply, and you're holding a futures position to, as a to hedge your exposure to the ETFs and the swaps that you have issued, Every time you roll that position, if we are in backwardation, you'll be selling an expiring contract at a higher price than where you buy the next. That is giving you a positive roll yield over time.”

“We started we traded the year in the 60 to $75 range looking at Brent. And I think there there is an argument that once the dust settles and we're on the other side of this, we should expect prices to settle in at least $10 higher level, maybe even to $15 higher. So the floor has moved higher for for this. And that basically means if you're looking at Brent crude for December at $80, that's potentially where the the new floor should be.”

“And and and, this is getting a little bit long, Harry. But I think also interesting to note that in the last six weeks, how much has The US crude oil production risen by zero barrels? How many additional rigs has been employed in in The US shale area? Zero rigs. Basically, where are The US producers? Why why are we not seeing any response? And I think part of that is is clearly the fact that the curve is very backwardated.”

“Everything I'm reading says that American farmers, and I'm sure it's probably the same in Europe, the farmers can't afford or can't get their hands on enough fertilizer to fertilize the crops as much as they normally would want to. So they're planting under fertilized crops, seems to me like that can only mean undersized yields that presumably results in higher prices. Am I right about that?”

“We have to remember hedge funds, if there's one thing they're not, they're never ever married to their positions. If something goes wrong, if there's a technical change or fundamental change, they'll seek a divorce as soon as possible, whereas the rest of us potentially can sometimes get bumped into a position where we we think we're right and the market is is wrong.”

“The most, striking one reason has been cocoa prices, which went from 2 and a half thousand to 12,000 only took utterly collapse back to where we came from simply because there was a response both from the demand side, which slowed, and the supply side, which increased. Chocolate manufacturers, they start to look at reducing the number of cocoa content. That makes, obviously, the chocolate bar a bit cheaper to produce. In some places, we also have shrinkflation, so the bar is suddenly not the size that you were used to. So the combination of these things basically had a major impact on demand in Europe.”

“Reason we just come to know as well that, miners in South America then need sulfuric acids in order to break down the copper from the from their mines. And that basically means with 50% of that coming out of The Middle East, then we also suddenly face a potential shortage in in that area. We talked about we we helium has been mentioned prior to the chips industry.”

“JPMorgan says that Iran can only withstand about two more weeks of having its crude oil exports blockaded by The United States. If that US blockade continues to be successful for more than about two more weeks, Iran will be forced to begin shutting in its oil production. And after about one more month, Iran would be forced to substantially shut in most, if not all, of its oil production because of a lack of any place to store the oil. Once shut in, those wells take a long time and cost a lot of money in order to bring back online.”

“The market panicked. And, when the market panics, it's a question of just getting out of positions or getting reduced, getting your exposure down to levels that you find that's manageable. And, so gold to a certain extent, some of the other metals will suffer from the success they've had in the previous months. So they've become a very widely held investment, meaning that they were also exposed when that situation unfolded.”

“I think there's an argument that once the dust settles and we're on the other side of this, we should expect prices to settle in at least $10 higher level, maybe even $15 higher. The floor has moved higher for this. That basically means if you're looking at Brent Crude for December at $80, that's potentially where the new floor should be. So I'm struggling to see any forward prices really reflect what potential will unfold in the coming months because it will take time.”

“Middle East has obviously expanded its production base. Why just sell oil out of the ground and send it on the ship when you can actually make some money on the process of refining these into other areas. That's why we suddenly left with a market where besides gas, we have all the associated productions of commodities... the energy intensive commodities, that's anything from aluminium to especially fertilize which requires a lot of gas with the main feed stock.”

“If you have a market which is backwardation, i.e. it's a signal of a relatively tight supply, and you're holding a futures position to hedge your exposure... every time you roll that position, if we are in backwardation, you'll be selling an expiring contract at a higher price where you buy the next. That is giving you a positive roll yield over time. And obviously, the opposite occurs if you have a period with ample supply.”

“Reason we just come to know as well that miners in South America then need sulfuric acids in order to break down the copper from their mines and that basically means with 50 percent of that coming out of the Middle East, then we also suddenly face a potential shortage in that area. We talked about helium has been mentioned prior to the chips industry. So it's just the whole, how the breadth of this crisis and how it impacts not only energy, but anything through to metals.”

“It really only takes one bad season for that whole equation to change around. And that's really the worry in the coming months, that if we see some troubled weather potential as well... we will see downgrades to crop production targets for this year. And that will start to eat into an overhanger supply because we are coming into this, just like the oil market, we're coming into this fertilizer crisis with ample supplies of some of the key crops.”