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60.39+0.33 (+0.55%)
At close: 7:50PM CEST
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Previous close60.06
Bid0.00 x 0
Ask0.00 x 0
Day's range60.39 - 60.84
52-week range53.44 - 65.43
Avg. volume0
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  • UAE’s Breach of OPEC Output Pact Shakes Oil Traders’ Faith

    UAE’s Breach of OPEC Output Pact Shakes Oil Traders’ Faith

    (Bloomberg) -- Just when OPEC seemed to have finally mastered the long-running problem of members breaching their oil-output targets, a new offender is emerging.The United Arab Emirates -- traditionally a loyal partner of group leader Saudi Arabia -- pumped a little bit over its agreed limit in July, according to OPEC data. It has admitted doing so again in August.Now, many traders are turning their attention to data showing the Gulf state’s excess may be far greater than previously believed, contributing to the drop in crude prices to a two-month low.The strongest signal that something was amiss came last month from the International Energy Agency, which estimated in its closely watched oil market report that the UAE pumped 3 million barrels a day in July. According to Petro-Logistics SA, which tracks international oil-shipping movements, the country supplied even more than that in August.Research firm Kpler SAS also said the country’s exports are higher than official output figures, while tanker data compiled by Bloomberg show the country shipped about 2.9 million barrels a day last month.Those figures are significantly higher than the 2.693 million barrels a day of August production announced by Energy Minister Suhail Al Mazrouei, which itself was more than 100,000 barrels a day above the country’s OPEC+ target.When asked about the difference between tanker-tracking estimates and official production figures, a spokesman for the UAE Energy Ministry declined to comment. The Abu Dhabi National Oil Co. also declined to comment. The state-run company has promised to significantly deepen its export cuts in October. Losing FaithDeriving a country’s output from shipping data isn’t an exact science. Many countries, the UAE included, have their own refineries that process crude domestically at a rate that varies from one month to the next. Some exports may come from storage tanks, rather than out of the ground, and apparent crude exports can be inflated by blending with a light oil called condensate, which is exempt from OPEC+ quotas. It’s also hard to tell whether vessels are completely full when they leave loading terminals.Still, the belief that a core member of the Organization of Petroleum Exporting Countries is breaching its quota has been influencing prices, according to oil traders who spoke to Bloomberg News, asking not to be named because they aren’t authorized to speak to the media.“When one of the core Gulf countries fails to meet its target on compliance, it raises market questions about the sustainability of the whole cuts project,” said Bill Farren-Price, a director at consultant RS Energy Group. “OPEC has done an incredible job of delivering the cuts so far, but they need to keep going.”OPEC and its allies have successfully revived crude from the depths of the coronavirus crisis, when U.S. prices dipped below zero. In large part, that’s because of their intense focus on ensuring that each member is in full compliance with their output target.Since the group agreed an historic 9.7 million barrel-a-day production cut in April, most of the effort to end quota cheating has been aimed at Nigeria and Iraq. This push, led by Saudi Arabia, has yielded significant results, with both countries showing higher compliance than in previous rounds of cuts.Yet the perception of cracks emerging elsewhere in the OPEC+ coalition, combined with fresh doubts about the strength of the global demand recovery as Covid-19 infections accelerate, is making traders jittery.“The market has started losing faith in the recovery, therefore bearish news is magnified and bullish news is somewhat dismissed,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “OPEC will have to get its act together, otherwise this market will remain depressed.”This could bring new tensions to the Sept. 17 meeting of the OPEC+ Joint Ministerial Monitoring Committee, which has been Saudi Energy Minister Prince Abdulaziz bin Salman’s principal forum for browbeating countries that are pumping too much.The UAE will soon feel pressure from Saudi Arabia, although it will probably happen discreetly, according to Helima Croft, chief commodities strategist at RBC.“Given the importance of the bilateral relationship between Riyadh and Abu Dhabi, as well as the close partnership between their two crown princes, we expect any production disagreements between these two countries to be handled quietly behind closed doors,” Croft said in a note.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Giant Trader Footprints Leave Trail to Tech Options Plays

    Giant Trader Footprints Leave Trail to Tech Options Plays

    (Bloomberg) -- As the debate rages as to who has had the most impact on option markets -- retail traders or institutions -- what’s becoming clear is the sheer size of the wagers of the professionals.RBC Capital Markets strategist Amy Wu Silverman noted bullish bets in a handful of technology companies in August as having all the hallmarks of a big institutional trade -- with “a staggering $1 billion-plus in premium spent.” Henry Schwartz at Trade Alert LLC cited trades with about $1.4 billion in premiums spent last month.The options data show that institutions jumped into derivatives trading to ride the powerful tech stock rally that started with day traders at home. Now with the Nasdaq 100 poised for another day of losses, the bigger question is how any pullback hit investors big and small.The most likely institutional trades were placed on Aug. 5 in options on stocks like Microsoft Corp., Facebook Inc., Adobe Inc., Inc. and Alphabet Inc., according to recent notes by RBC and Trade Alert. They involved call spreads -- strategies designed to profit from a modest increase in stock prices.One example is a call spread in November Microsoft options. The bet is designed to pay out if the stock -- which closed around $214 on Friday -- rises to between $220 and $240 at expiry. That was priced at $6.75 a contract and its value is now somewhere near $7, according to Schwartz.A second trade, which the investor has already closed out, was a similar strategy betting on modest gains in Facebook shares. That was bought for $10.50 a contract and sold for $15.60 with the proceeds put into a call spread with higher strike prices, he said.Huge swings in stocks experiencing heavy options volume have consumed investor attention recently as U.S. benchmarks surged to multiple records. On Monday, SoftBank Group Corp. shares tumbled in Tokyo after reports that the Japanese conglomerate made substantial bets on equity derivatives amid the surge in technology stocks.SoftBank previously said it invested in Adobe, Microsoft, Alphabet in a filing dated June 30, and founder Masayoshi Son mentioned Facebook during a recent post-earnings conference call.SoftBank’s Big Options Bet Tests Investor Faith in Masayoshi SonDespite the stock market selloff late last week, whoever was behind the early August trades is still doing well, according to Silverman.“While Thursday and Friday’s move certainly hurt, it is important to note that all the option positions initiated on August 5th are still marking up,” she said. The investor has reached the strike price in bets on Facebook, Adobe and, though is still out of the money on wagers on Microsoft and Alphabet, she noted.Given the frenzy surrounding the options bets, traders will be keeping a closer than usual eye on pricing in the single stocks -- and the broader market -- as the expiry draws closer.“The investor will lose $1 billion if these trades do not expire in-the-money,” said Silverman.Nasdaq Whale Theory for Tech Stock Surge Is Stirring DoubtsHere’s a selection of some of the trades cited by strategists:Microsoft Nov. $220/$240 call spread initiated Aug. 5 that’s still open; price was $6.75, value is now near $7Facebook Nov. $250/$275 call spread initiated Aug. 5 that was bought for $10.50 and sold for $15.60 on Sept. 3 to buy a $295/$340 Nov. $200/$230 call spread initiated Aug. 5, bought at $12 and sold at $24.75 on Aug. 26 to buy the $250/$280 spreadAdobe Oct. $450/$490 call spread initiated Aug. 5 that’s still open; price was $17.20, value is near $23Alphabet Oct. $1650/$1950 call spread initiated Aug. 26; shares are lower since this tradeAdobe Oct. $520/$620 call spread initiated Aug. 26; shares are lower since this trade(Updates with Nasdaq futures in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Nasdaq Whale Theory for Tech Stock Surge Is Stirring Doubts

    Nasdaq Whale Theory for Tech Stock Surge Is Stirring Doubts

    (Bloomberg) -- A report that SoftBank Group Corp. is making billions by using options to bet on technology stocks has stirred speculation the Japanese conglomerate could have been a driving force behind the rally -- but not everyone is convinced.Evidence suggests the kind of strategies pursued by institutions like SoftBank have a minimal effect on stock-market volatility, according to Benn Eifert, chief investment officer of hedge fund QVR Advisors. Citing commentary from derivatives trading desks, he said the real power is being wielded by day traders buying enormous amounts of call options on tech stocks.Eifert’s analysis speaks to a debate that’s been raging in the stock market about who is behind a surge in options trading and what it all means for investors. Over the weekend, the Financial Times reported that SoftBank spent $4 billion over the past few months buying equity derivatives on technology stocks.Several analysts have pointed out that the heft of large institutional players remains relatively small compared with the rest of the market. Retail punters shelled out $40 billion in call premiums in a month, data from the Options Clearing Corp. compiled by Sundial Capital’s Jason Goepfert show.Frenzied Tesla Speculators Propel 77% Surge in Options TradingEvidence of retail sway comes from parsing the types of trades, according to Eifert. Individual investors have been piling into call options that usually expire within two weeks. The short-term nature of the contracts requires hedging by market makers, which in turn fanned higher stock prices.In contrast, trades favored by large institutions don’t necessarily require market makers to buy and sell the underlying stock to hedge themselves, Eifert said. He said institutions tend to use strategies such as buying a call spread and selling the underlying shares -- a technique to profit from a rally, but also limit risk.“These transactions themselves did not represent meaningful buying pressure,” Eifert wrote on Twitter. The call spread trades did contribute to the curious phenomenon of the S&P 500 Index rising at the same time as VIX Index, he added.To be sure, it’s impossible to tell exactly who is behind a trade just by looking at the order flow. Parts of these big institutional trades were likely done over-the-counter, which makes it harder to gauge their full market effect, according to Kambiz Kazemi, principal at La Financiere Constance Inc.Options activity by both big and small traders has probably heightened market volatility, according to RBC Capital Markets strategist Amy Wu Silverman.“The sheer scale of call buyers both institutional and retail cause a ‘gamma’ squeeze situation for dealers, exacerbating moves in tech,” she wrote in a report on Monday. (“Gamma” is a term for option price drift that dealers often seek to offset by buying or selling the underlying stock.)Call options volumes started spiking in March, April and May as retail investors opened up Robinhood accounts and started a frenzy of day trading, Silverman said, adding that the jump was “for smaller and smaller contract sizes,” a typical footprint of retail.Big institutional trades in tech started arriving in August, according to Silverman. She cited call spreads in a handful of technology companies as having the hallmarks of a big institutional bet.The trades were placed on Aug. 5 in Microsoft Corp., Facebook Inc., Adobe Inc., Inc. and Alphabet Inc. options. By then, the Nasdaq 100 had rallied some 60% from the March lows, suggesting institutions were merely following others into the trade.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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