Top Traders Unplugged GM35: The Drivers of the Commodity Markets ft. Nicky Ferguson
Positional Impact
- While commercials hold the largest outright positions, speculative position changes have a comparable price impact.
- Speculative positions drive pricing more significantly than commercial ones, which mostly reflect fundamentals and inventory.
Flow Focus
- Focus on speculative flows when fundamental shocks are absent.
- Financial flows determine the price path towards long-term fundamental anchors.
Trading Without Balances
- Nicky Ferguson successfully traded commodities for years without doing fundamental balances.
- He inferred fundamental changes from market pricing, like Dubai benchmark structure.
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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