Beware of “hockey sticks”, oil traders hedge exposure in 2025
Open interest in spread options on the WTI calendar has surged, reaching an all-time high. This reflects traders’ concerns that the anticipated supply won’t materialize until 2026.
This week, the rapid spread between July and August traded around $0.90 per barrel, while the gap between December 2025 and December 2026 was only $0.50 per barrel, leading to what’s being termed a “hockey stick” curve in futures.
To shield against sudden geopolitical shifts, traders are turning to calendar spread options. This helps keep future positions stable, even if the market narrows unexpectedly.
Interestingly, short positions by money managers have been creeping up, especially noted in the week ending May 27, which has reduced the long-term ratio to 2.6:1.
US Ethane Blues damages both sellers and buyers
The recent export restrictions on ethane from the US government are causing significant ripples across Texas’s oil and gas sector. It’s projected that about half of the exports—mainly targeted at China—will encounter regulatory challenges.
Since the announcement, Mont Belvieu Ethane prices have plummeted by 25%, trading now at $0.19 per US gallon, marking the lowest point since November 2024.
Enterprise Product Partners, a leading ethane exporter, reported this week that the Trump administration rejected three ethane cargoes totaling around 2.2 million barrels. This could lead to a significant inventory buildup along the coast.
Although the US government claims ethane is for military purposes, considerably more of it is used by petrochemical companies to produce plastics, particularly in collaboration with China, which hosts nearly 50% of the new global capacity for ethylene production.
As China buys less, Europe becomes a globally important LNG buyer
With spring coming to a close, Europe and Asia are increasingly vying for spot LNG cargoes, as Europe’s purchasing power diminishes.
This year, with China’s LNG imports down by 25%, European buyers have started acquiring more LNG than their Asian counterparts, spending an estimated $8 billion on additional imports.
Currently, European gas stocks are about 49.9% full, and despite the European Parliament’s aim to lessen their October inventory target to 83%, the need for ongoing imports remains.
From January to May 2025, European LNG imports rose by 19% compared to last year, with France leading as the primary buyer, followed by Spain and the Netherlands.
Airlines begin complaining about SAF orders
At the International Air Transport Association (IATA) annual meeting in New Delhi, many industry leaders voiced concerns that stringent orders on sustainable aviation fuels (SAF) are disrupting airline operations.
The aviation sector still aims for net-zero emissions by 2050, but SAF prices are currently about three times higher than conventional jet fuel—$2,000 versus $620 per metric ton.
SAF production is expanding globally, driven by strong orders from Europe and Japan, but it still only accounts for about 1% of total jet fuel consumption.
However, doubts linger regarding refiners’ ability to ramp up SAF production by 2030, given that current costs are still far above market rates.
Silver will overtake gold as the top precious metal of 2025
Silver prices have soared, reaching their highest levels since February 2012, now trading above $35 per ounce. Factors driving this surge include concerns about supply, safe-haven investment trends, and positive technical patterns.
Even with projected supply shortages resulting in market deficits, silver is anticipated to continue its upward trajectory, potentially exceeding $40 per ounce. An additional boost this year is due to its essential role in solar energy panels.
Mexico remains the world’s top silver producer, contributing less than 20% to the total supply, yet producers there have seen stock prices rising sharply this week.
Indian coal romance shows the first crack in early monsoon rain
India has witnessed a notable 9.5% decrease in coal-fired power generation this May, marking the steepest drop in five years.
The onset of monsoon in South Asia has come roughly a week earlier than usual, leading to reduced power generation demands as temperatures fall and industrial activities slow.
Overall power generation in India has fallen by 5.3% compared to last year, with coal contributing significantly less, while renewable energy sources, especially hydroelectric power, have seen an increase.
Congo Eyes Cobalt’s export quota is Miners Revolt
The Democratic Republic of the Congo, the leading cobalt producer, is shifting from an export ban to a more nuanced export quota system.
This change follows a four-month export ban announced in February, aimed at bolstering profits and mitigating global oversupply, leading to a significant price increase in cobalt recently.
Interestingly, cobalt production in the Congo often coincides with copper mining, which suggests that copper exports will not face significant disruptions.
Nevertheless, miners like China’s CMOC and global giant Glencore are raising concerns about the government’s new export quotas and potential loopholes that might undermine their effectiveness.
