CTA Positioning Update
According to UBS’ biweekly CTA momentum study, CTAs bought oil and sold precious metals in size in February. The investment bank expects ⅔ of those flows to reverse in the next two weeks.
CTA’s have meanwhile built a decent short position in agriculturals, and flows should remain negative there.
'Contrarian' trades according to UBS: bullish metals (both precious and industrials), bearish Oil and Coffee
'Go with momentum' trades according to UBS: bullish Cattle Feeder, Live Cattle, Lean
Red Sea Update
The 192-km (120-mile) Suez Canal is the quickest sea route between Asia and Europe. About 9.2 million barrels per day of oil flowed, opens new tab through the canal in the first half of 2023, representing about 9% of global demand, the U.S. Energy Information Administration said, quoting Vortexa data.
Because of the ongoing Houthi strikes, vessel Re-Routing currently remains the preferred solution - leading to higher shipping rates and ultimately to higher transportation costs for businesses and consumers.
Meanwhile, a look at container shipping rates leads to the conclusion that the current problems in the Red Sea and Suez Canal are probably already priced in. Over the past two to three weeks most shipping rates started to decelerate again.
OPEC+ Considers Extending Voluntary Cuts
OPEC+ is contemplating the extension of self-imposed reductions in oil production into the second quarter, as disclosed by three sources within the OPEC+ alliance to Reuters. This move is aimed at offering further assistance to the market, and there is a possibility of maintaining these cuts until the year's end, as suggested by two of the sources. In November of the previous year, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, spearheaded by Russia, had agreed to voluntary production cuts totaling around 2.2 million barrels per day (bpd) for the initial quarter of the current year. This initiative was led by Saudi Arabia, which continued its own voluntary reduction.
Oil prices have found support this year from rising geopolitical tensions due to attacks by the Iran-aligned Houthi group on Red Sea shipping.
This week look out for the following:
ISM Services PMI on Tuesday
JOLTS Job Openings on Wednesday - also Powell testifies
Job Market Report on Friday
A subscription costs $29 a month, and you will receive an additional in-depth report every Sunday evening at 6:00 PM CEST. Moreover - you will receive a quarterly economic growth report as well. That information will only be published to members and not the general public.
Till next Monday, Lukas
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