We may have a catalyst for the second half of a move that's been talked about for a few months.
Back on August 8th Izabella posted "Assessing the scale of metal warehouse trades" wherein she quoted Morgan Stanley (her emphasis):
...This might well have the effect of artificially exacerbating backward-dated markets or creating a backward-dated market even where surplus market conditions might indicate a fundamental contango term structure as shorts seek to delay delivery on exchange. In short, this policy has the potential to create an unintentional artificial supply and demand dynamic in LME markets that would be at odds with longer-term results from these measures....She ended the post with:
...Which leads us to wonder… if LME load-out rate proposals are enough to create something of a false backwardation/squeeze in metals — by simply denying shorts the ability to warrant metals when needed — could a similar phenomenon, perhaps one fuelled by rising financing costs rather than LME rules per se, be having an impact on shorts in other commodity markets as well?...The link goes to a July post on oil, "The WTI carry unwind".
Which is all it took for me to post, on Aug. 8, what I thought her thesis would look like in pricing, "The Future Price Trajectory of Copper and Aluminum and the Implications for Oil":
In Which Our Hero Explains the Importance of Recent Events and Their Impact on the Cost of Day-to-Day Living ...
...Here we had an initial condition of overabundance of the metals yet the price was not acting as one would expect. That was an anomaly and anomalies can be profitable if you see and understand them before the crowd.
The price action to look for is: first up (although some of that has already occurred), and then, a picture even a four-year-old can understand:
Now we may get to see the same mountain chart for oil.
From CNBC via Yahoo Finance:
As President Barack Obama and new Iranian President Hasan Rouhani converge on the United Nations on Tuesday, energy market watchers are asking whether recent conciliatory gestures from Iran are genuine-and what they could mean for global oil.
Experts who spoke with CNBC said that Iran's efforts at some sort of rapprochement appear to be real, and for two very practical reasons: It's being economically strangled more than ever by coordinated, international sanctions, and it's staring at a credible U.S. threat of force over its nuclear program.A new administration in Iran gives the country the opportunity to reassess its foreign policy, and in effect acknowledge that its attempts to counter sanctions have largely failed...
..."The Iran premium I've got to believe that it's somewhere around $10 a barrel," he said.Others dispute the idea of a risk premium hanging over markets. Trevor Houser, partner with Rhodium Group, said the signs of a thaw in relationships are not enough to move the price of oil much.
"I wouldn't expect much of a drop in the price of oil just because of the diplomatic outcome. The Iran premium that's in the price right now has been the actual reduction in supply," he said. "It will take an act of Congress to remove the sanctions."...It was mainly OPEC members ex-Saudi Arabia that replaced Iranian crude in the market.
Today WTI settled at $103.13 and Brent at $108.64. We would be willing to entertain prop bets at $90 and $95 respectively.
*"Marginal Revolution's Tyler Cowen: '...Kaminska Wins'".