Oil commentary - 4 January 2018

Morning all. Brent closed last night up 1.27 to $67.84, WTi closed at $61.63 up 1.26 and Bitcoin closed at $15,133 up $397. Well, 2018 has started positively for crude hasn't it? Since Dec 27 WTi is up nearly 5%. Quite why we rallied last night I don't know - some people are attributing it to "cold weather" in the US. I'm sorry but I don't know too many people who usually try and sunbathe on the Great Lakes this time of year do you? Also the situation in Iran is causing people to get a little flustered, even though it hasn't affected Iranian production so go figure. The market is jumping on any bullish news regardless if there is any logic around it or if it makes sense. One thing though that is interesting is that the front Brent crude spread has rallied around 15c in the last few days and the Singapore fuel oil market has flipped in to contango for the front 2 months. What does this signal? Well if Brent spreads are backwardated meaning the next Brent month swap is cheaper but the end user market in Singapore is higher as that is in contango is it to be a good year for the product trading market? I think a lot of people will certainly be hoping so. It will be interesting to see how this pans out. One other thing that is interesting (I'm in an interesting mood today), is the correlation between the Schlumberger stock price (Schlumberger are the world's largest oil field services provider in case you live under a rock) and the price of WTi. The two are correlated to the tune of about 0.61. So it is clear that oil services company are indeed benefitting from the rise in crude oil prices. Could it be that these guys are the ones buying the paper market to keep not only the oil price but the equity market at yearly record highs? Answers on a post card. Actually don't send me a post card, there's no postal service in Dubai so by the time it arrives WTi will probably be at $30 again...Stats later - whatever they mean anymore. Good day.