Oil (CL) Live Intraday trading

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February 5 2016

Citi: 'We should all fear Oilmageddon'

Tracy Alloway

http://www.theage.com.au/business/energy/citi-we-should-all-fear-oilmageddon-20160205-gmmnpo.html


Markets are currently in a well-oiled "death spiral," according to analysts at Citigroup.

"It appears that four inter-linked phenomena are driving a negative feedback loop in the global economy and across financial markets," the analysts led by Jonathan Stubbs write, citing the resilient US dollar, lower commodities prices, weaker trade and capital flows, and declining emerging market growth.


Traders of crude oil and natural gas: A global recession, triggered by lower commodities prices, would leave nowhere to hide, the Citi analysts say. Photo: Bebeto Matthews

"It seems reasonable to assume that another year of extreme moves in US dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop and make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks," they add. "Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon."

Their case is bolstered by a collection of charts showing the linkages between the four factors cited above, including the importance of lofty oil prices to the ready supply of petrodollars circulating in the world economy and flowing to financial assets. Oil exporters have enjoyed more than $US6 trillion ($8.4 trillion) flowing into their current accounts, according to Citi's estimates, implying some $US4 trillion of capital in sovereign wealth funds (SWFs).

"But, the collapse in oil/commodity prices and sharp fall in the pace of world trade means that these same economies will likely experience an aggregate current account deficit for the first time since 1998," says Citi. "In turn, this is likely to put pressure on SWF and broader emerging market liquidity as governments and emerging market economies would need to 'lean' on reserves in order to maintain economic, political and social stability. This has clear feedback loops across emerging markets."

Accordingly, the impact of the feedback loop is being felt far and wide in financial markets, extending even to US inflation expectations. Where once 10-year inflation breakevens had little relationship with the price of oil they have for the past two years moved in tandem. With house forecasts for a 4 per cent strengthening of the trade-weighted US dollar and oil prices at $US50 by the end of the year, Citi offers some hope that the feedback loop can be partially reversed though not necessarily broken. Should the bank's base case of stabilising currency and commodities markets materialise, the analysts say, financial assets should respond accordingly and recover.

However, a move "the other way would add fuel to a 'significant and syncronised' global recession," the bank warns.

"We should all fear Oilmageddon," Citi concludes. "Global recession, as we define it, would leave nowhere to hide in equities. Cash wins."
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algofy said:
Yep, like staz says, OPEC doesn't move markets...pfffft
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ok, do you have statistic of opec deals and price reaction? does price follow the deal and how long?
PS. last time deal cut was in 2008 year. it was 8 years ago.
 
stasbz said:
ok, do you have statistic of opec deals and price reaction? does price follow the deal and how long?
PS. last time deal cut was in 2008 year. it was 8 years ago.
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Doesn't matter, underlying fundamental player news/rumors moves any market.
 
stasbz said:
no difference.
on bigger timeframe you hold trade longer. stop is bigger, position is smaller, target is bigger.
there were very good intraday oppotunities on 15d 5m chart.
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That means you would have to change a small intraday stop loss to a relatively much larger multiday stop loss.

What are they? Say, $0.50 and $5.00 respectively?

After using an initial margin-to-equity ratio for intraday, the account would be taking huge risk for becoming a multiday, especially considering overnight margins. Easily blow up with real-life trading!


OddTrader said:
This trade was an excellent one indeed - picture perfect!

Switching from intraday trading, using 15d 5m chart (post #2), to intramonth trading, using 180d 1h chart (post #47), would require very special skills! :)

Just unsure whether options is required for how to manage overnight/weekend gap risk.
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algofy said:
Doesn't matter, underlying fundamental player news/rumors moves any market.
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news give volatility to markets. but the direction of markets are determined not by the news itself. the direction could be established before news and continue after news.
 
stasbz said:
news give volatility to markets. but the direction of markets are determined not by the news itself. the direction could be established before news and continue after news.
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I think commodities will generally follow through to underlying fundamentals if the change in fundamentals is significant enough. Crop reports come out with significantly less expected crop production due to drought, prices are probably going to trend higher in the medium to long term and follow the fundamentals. Do you agree with this?
 
algofy said:
I think commodities will generally follow through to underlying fundamentals if the change in fundamentals is significant enough. Crop reports come out with significantly less expected crop production due to drought, prices are probably going to trend higher in the medium to long term and follow the fundamentals. Do you agree with this?
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maybe in such specific markets as coffee, corn and etc, where much less speculators and much more producers, it does matter.
but not in crude oil.
max oil prices by years.
1999 - $12
2006 - $60.
2008 - $140.
2009 - $40.
2011 - $110.
2016 - $30.
how did fundamentals change during this time to couse such movements?
 
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