GM35: The Drivers of the Commodity Markets ft. Nicky Ferguson
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 712 Ratings
🗓️ 1 March 2023
⏱️ 56 minutes
🧾️ Download transcript
Summary
Today we are joined by Nicky Ferguson, Founder of It's Not a Science, an energy markets research firm based in Basel, Switzerland. We talk about speculative positioning in oil and natural gas futures, and how to distinguish between price action driven by fundamentals and flows. We discuss real time indicators of oil supply and demand, and the time it takes various investors to absorb new information. Finally, we discuss the limitations of the DXY dollar index as a baseline for measuring commodity price returns, increased options flows given new players in the market, and ways to understand what's going on based on modes of oil transport. Join us for a deep dive with an oil trader turned business owner, for an expert view of the mechanics of the energy market.
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Episode TimeStamps:
02:46 - Introduction to Ferguson and It's Not a Science
09:42 - The major players in the energy markets
12:56 - Speculative vs. commercial
18:43 - Forecasting the flow
25:02 - What has caused spikes in nat gas?
27:15 - Financial flows in commodity markets
30:22 - Risk considerations
32:14 - The relationship between fundamentals and price action
34:28 - Measuring demand
36:09 - The findings from Ferguson's research
39:46 - Oil on water supply vs land supply
41:33 - The impact of the dollar changes
45:33 - Measuring expectations
48:00 - The state and future of Ferguson's business
53:49 - Key takeaways from Niels
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Transcript
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| 0:00.0 | Options will become kind of the weapon of choice for a lot of the industry. |
| 0:10.0 | And we saw that very clearly last year, where we had absolutely enormous positions in the options market, especially in crude, but a lack of people trading futures. And obviously, you need the futures market to move to put those options positions in the money. |
| 0:25.6 | And we just had a disconnect. So everyone was sitting waiting on their options, |
| 0:29.6 | but no one was buying the futures to actually make that happen for them. |
| 0:33.6 | I think we're going to get a few more contradictions like that, |
| 0:36.6 | and staying on top of where |
| 0:37.7 | these flows and positions are sitting, whether it's in futures or options, will be really key |
| 0:42.7 | going forward to understand where those constraints are. Imagine spending an hour with the |
| 0:50.1 | world's greatest traders. Imagine learning from their experiences, their successes, |
| 0:54.8 | and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can |
| 1:01.8 | learn from the best hedge fund managers in the world so you can take your manager, due |
| 1:06.0 | diligence, or investment career to the next level. Before we begin today's conversation, |
| 1:11.1 | remember to keep two things in mind. |
| 1:13.1 | All the discussion we'll have about investment performance |
| 1:15.7 | is about the past, and past performance |
| 1:17.9 | does not guarantee or even infer anything about future performance. |
| 1:21.8 | Also understand that there's a significant risk |
| 1:23.9 | of financial loss with all investment strategies, |
| 1:26.5 | and you need to request and |
| 1:27.8 | understand the specific risks from the investment manager about their product before you |
| 1:32.2 | make investment decisions. |
| 1:34.0 | Here's your host, veteran hedge fund manager, Nealz Kostrup Larson. |
... |
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