5 Comments

More granularity in CoT data may easily result in the opposite effect: when market players are more certain about the intentions and ideas behind certain big positions, it’s not inconceivable that many times this understanding will just exaggerate the price action benefiting that position.

Otherwise, not sure position limits is the answer either. Reducing capabilities of the financial players just distorts price discovery. Some of the TTF positions must be dirty hedges for other totally irrelevant positions that some quants ‘discovered’ a correlation between, genuine or imaginary, but in any case they should be welcomed to do whatever they see fit for efficiently functioning overall markets.

Expand full comment

The debate about speculative oil positions was hot but irrelevant in the US in the early 2000s, Seb.

TTF is simply a market going thru a price discovery excursion. These are both normal and necessary when there is potential for a structural change in market conditions. Reversion is the rule but it may take months.

I think Energy Aspects is correct but that this is more of a short squeeze than short covering.

I see an LNG bubble about to burst and that means great uncertainty about conventional gas supply in Europe.

Expand full comment

Thanks Art for your insight. I agree this is a short squeeze, which is distinct to the Energy Aspects position on this. Problem is that the costs of this squeeze are borne by long-suffering consumers, to whom this is not irrelevant.

The change in market structure is not potential — it’s already happened and is very real, both on the supply and demand sides. Current pricing trends are not taking into account the latter, so consumers are bearing higher costs for a commodity of declining utility value in Europe.

And as you say, the LNG wave will break. Futures markets have been pricing this in for many months. Most of the questionable or inexplicable price action has happened in the day-ahead, prompt and front month markets.

Expand full comment

Thanks for a brilliant read, Seb!

Expand full comment

Thanks for saying so Ketan, appreciate that

Expand full comment