– Open interest in WTI calendar spread options – contracts that see market participants bid on the future value of crude oil futures across different delivery months – has reached an all-time high as traders expect this year’s assumed oversupply to only materialize in 2026.
– The prompt spread between July and August was trading around $0.90 per barrel for most of this week, whilst the difference between December 2025 and December 2026 was a mere $0.50 per barrel, creating a ‘hockey stick’ curve in futures.
– Seeking to hedge their exposure to sudden geopolitics-driven shifts, market participants are using calendar spread options to ensure their futures positions don’t blow out in case of an unexpected market squeeze.
– Short positions held by money managers have been rising in recent weeks, most notably posting a 10% week-over-week increase in the week ended May 27 to 124,000 lots, lowering the long-to-short ratio to 2.6:1.
US Ethane Blues Damage Both Sellers and Buyers
– The US government’s recently announced export restrictions on ethane have started to send ripples across Texas’ oil and gas industry, with all China-bound supplies (50% of all exports) now expected to run into regulatory hurdles.
– Mont Belvieu ethane prices have been in a freefall since Trump flaunted export restrictions, shedding 25% since May 21 and closing this week at $0.19 per US gallon,…
- Wary of the ‘Hockey Stick’, Oil Traders Hedge Their 2025 Exposure
– Open interest in WTI calendar spread options – contracts that see market participants bid on the future value of crude oil futures across different delivery months – has reached an all-time high as traders expect this year’s assumed oversupply to only materialize in 2026.
– The prompt spread between July and August was trading around $0.90 per barrel for most of this week, whilst the difference between December 2025 and December 2026 was a mere $0.50 per barrel, creating a ‘hockey stick’ curve in futures.
– Seeking to hedge their exposure to sudden geopolitics-driven shifts, market participants are using calendar spread options to ensure their futures positions don’t blow out in case of an unexpected market squeeze.
– Short positions held by money managers have been rising in recent weeks, most notably posting a 10% week-over-week increase in the week ended May 27 to 124,000 lots, lowering the long-to-short ratio to 2.6:1.
- US Ethane Blues Damage Both Sellers and Buyers
– The US government’s recently announced export restrictions on ethane have started to send ripples across Texas’ oil and gas industry, with all China-bound supplies (50% of all exports) now expected to run into regulatory hurdles.
– Mont Belvieu ethane prices have been in a freefall since Trump flaunted export restrictions, shedding 25% since May 21 and closing this week at $0.19 per US gallon, the lowest reading since November 2024.
– One of the top US ethane exporters, Enterprise Products Partners, announced this week that the Trump administration rejected three ethane cargoes totalling 2.2 million barrels, potentially leading to a huge inventory build in coastal tanks.
– The US claims that ethane is used for military purposes, but its primary use is in petrochemicals to produce plastics, with China representing 50% of new global capacity for ethylene production.
- As China Buys Less, Europe Becomes the Key LNG Buyer Globally
– With the spring shoulder season coming to a close, Europe and Asia are set to face off to procure spot LNG cargoes as the Old Continent’s buying spree is set to narrow East-West differentials.
– As Chinese LNG imports have dipped by 25% so far this year, Europe has been buying more LNG than Asia every single month in 2025 to date, with European buyers expected to spend $8 billion on additional imports.
– Europe’s gas inventories are currently 49.9% full, and even if the European Parliament were to lower the October inventory target to 83%, regional buyers would still need to continue their elevated imports.
– European LNG imports are up 19% from a year ago after January-May 2025, taking in 56.6 million tonnes, with France keeping its pole position as the continent’s main buyer, followed by Spain and the Netherlands.
- Airlines Start Complaining About SAF Mandates
– The annual meeting of the International Air Transport Association (IATA) in New Delhi was replete with industry concerns that stringent mandates for sustainable aviation fuel (SAF) are disrupting airlines’ operations.
– Whilst the airline industry still maintains a target to reach net zero by 2050, the price of SAF is currently triple that of conventional jet fuel, a whopping $2,000 per metric tonne vs $620/mt for jet in Singapore.
– Driven by strong mandates in Europe (6% by 2030) and Japan (10% by 2030), production of SAF has been growing globally – doubling in 2025 to around 2 million tonnes – but it still only represents 1% of total jet fuel use.
– There remain serious doubts that refiners will be able to ramp up SAF production to the required levels by 2030, especially given that throughout 2024, the cost of production was $150-200/mt higher than market prices of SAF.
- Silver Overtakes Gold as The Top Precious Metal of 2025
– Silver prices have soared to their highest since February 2012, trading above $35 per ounce, with the triple whammy of tight supply, safe haven investment appeal and constructive technical momentum pushing the metal ever higher.
– Silver has been in a structural market deficit since 2021 and even though the supply shortage is expected to narrow some 20% year-over-year to 0.15 billion ounces, there’s still bullish momentum for silver to rise above $40/lb.
– Having risen 22% in 2024, silver prices have added another 25% this year as the precious metal’s important role in solar energy panels (silicon wafers are covered with silver) and electrification keeps demand robust.
– Mexico is the world’s largest silver producer, accounting for slightly less than 20% of total supply ( and followed by China, Peru and Chile), with Mexico-focused producers such as Fresnillo seeing their stock value rise 15% this week alone.
- India’s Coal Romance Shows First Cracks Amidst Early Monsoon Rains
– India’s coal-fired electricity generation posted the largest year-on-year decline in five years, dipping by 9.5% in May, as higher renewable generation and weaker demand continue to pressurize coal markets.
– The South Asian country’s monsoon season started 8-9 days earlier than usual, marking the earliest start to the rainy season since 2009, drastically lowering power generation needs as temperatures drop and industrial activity seasonally subsides.
– Total electricity generation across India fell 5.3% from a year ago to 160.4 billion kWh, of which 113.3 billion kWh came from coal, whilst renewable energy rose to 24.7 billion kWh, up 17% from a year ago.
– Whilst India maintains a 280 GW capacity target of solar by 2030, most of the past month’s clean energy boost came from hydropower as ample rains lifted hydro generation to 14.5 billion kWh, roughly 60% of clean energy output.
- Congo Eyes Cobalt Export Quotas as Miners Revolt
– The Democratic Republic of Congo, the world’s largest cobalt producer, accounting for 71% of global output in 2024, is expected to replace its current export ban with a more nuanced system of export quotas.
– Seeking to improve profitability and curb global oversupply, the DRC government announced a four-month export ban on February 22, a decision that doubled prices in less than two months as cobalt is currently trading around $12 per pound.
– Cobalt production in Congo is the by-product of copper mining, with exports of the red metal continuing unimpeded, suggesting that the past months’ inventory stock build will be brought back into the market at some point.
– The top cobalt miners in the DRC, China’s CMOC and global mining giant Glencore, have been protesting the government’s export ban decision, stoking concerns that Congo’s new export quota system could be circumvented by them.