 Okay, very good morning guys. It's Tuesday 21st of April. I hope you are doing well and you joined us at quite a historic moment That happened in markets last night and as you can see to the side of me Will and I were still at our desks last night and we managed to catch The oil move as it was unfolding live and a really great 12-minute little session that the world did yesterday. So if you go on our YouTube channel Obviously, please subscribe to the channel. I'd be much appreciated first and foremost But if you scroll down we have this kind of morning briefing section So he's got a snap market analysis pieces that we do we put it in there I mean we just dropped this one about 10 hours ago and it's already got you know Nearly 25,000 views, which is just amazing But I think that's down to the fact that you know, it is a little bit unusual or not a little bit It's very unusual. Obviously the price of oil yesterday trading below zero for the first time in history traders basically Willing to pay $40 a barrel just to get someone to take crude off their hands, which is absolutely unprecedented and you know, this was the that the move that really solidifies that looking at the kind of first month contracts So in this case would have been the expiring today May futures contracts Getting all the way down and you can see here for the first time ever breaking the kind of zero bound on the on the on the down side So definitely this is the real talking point and thankfully it was something where for some of our new Kind of trainee traders that had started our program yesterday This was a session that we spoke at at length about this bit specific issue about you know This extreme contango at the moment and what exactly does that mean? How does it happen and so on so hopefully everyone was was well prepared for that? But absolutely jump back on to the YouTube channel that video there what just happened to oil prices That was direct from will our managing director. So fantastic kind of glimpse to seeing it all Unravelled as it did last night. So yeah, I'm going to give you a summary But definitely check that out as well when you get 12 minutes spare Going forward throughout the rest of the day. Now just a quick look at this morning. What is going on? Well, you know, that is the rule focal point There's been a little bit of a dip overnight in equity index futures Quite a few people Bloomberg pinning that on actually some news from the North Korean leader Kim Jong-un who said to be Unwell at the moment following some surgery and perhaps then some Apprehension about who his potential replacement might be not sure if I buy into that a great deal to be honest And any time we have seen in the past kind of North Korean related news obviously more based around kind of Kind of ballistic missile testing that we had back what in 2017 type era That generally the news tends to be faded quite quickly And I don't really see this being too much different and that's already kind of happening at the moment As we go into the European open equity index futures just bumping up a touch And also to kind of validate that that idea gold and Tino. It's not really responding at all Gold fairly flat down about three dollars trading at 1708 in the futures the 10 year up about two and a half I'm looking at crude. Where does it trade this morning before we get into what exactly happened yesterday? I'm looking at the June contract. Obviously, this was where the volume is so the kind of classified front month And that remains at just above 20 bucks and we did run down to very close 19 cents toward the the figure Or the handle in kind of late overnight or late US trade Probably now we've we've etched out a fairly significant point of resistance here, which we got to Test in the Asia Pacific session before we've come back down a Decent kind of buck and 20 cents and that being that initial kind of blip low that we had at the reopening of globe x trade To kick off the week yesterday, so oil in the June contract is positive about a dollar, but Absolutely still warrants monitoring and in the May contract obviously due for expiration today after touching obviously down a negative 40 32 is now up trading at a positive $1.36 for the time being but again, I would say you want to be focusing on the June contract Don't worry too much about that May one at the moment, but I'm going to cycle you through a few different things So first of all, let's just explain from a top level What exactly happened last night and then the easiest way for me to summarize this was that the primary Reason behind it was because of the end of the May contract So with the crude futures contracts, they're a little bit different from say Equity in terms of equity indices or if you were trading say the US T note Those typically go in for kind of calendar-based quarter futures contracts So typically March June sep and deck whereas with oil given the fact that there's a degree of physical Delivery tied to the receipt if you let or hold the contract to expiration Meaning you'll take delivery and that's going to be an important point We'll talk about that's led to what happened yesterday But basically because the end of May contract Forces kind of physical receipt at a time then when storage capacity is low And giving that that timing they've got to get it off their hands given the fact that predominant volume of the futures markets is Speculators they have no intention at all about taking delivery of physical barrels of oil And that means then it leads to force selling to the point where traders were willing to pay $40 i.e. a negative price of about $40 30 cents just to get someone to take that crude off their hands because they definitely don't Want receipt of it This then leads us on to a little bit more detail about here, so this is Cushing Oklahoma, so this is where we look at the specific geographic kind of hub, which is the storage point of Oil in North America before then it kind of gets distributed elsewhere within the country and beyond and in the past three weeks crude has been flowing into cushing at a breakneck speed averaging about 745 thousand barrels per day and taking in more oil From an equivalent point of view than what the entire country of Belgium would consume that's going in Every single day at the moment Now at that rate if that were to remain consistent it would basically mean then that tanks If I switch over my chart here This is the the cushing chart so you can see the massive jump that we've had at this rate Tanks would then be full before the end of May Something that's never happened before we have got into previous and many years ago Well several years ago We got to a point where that was looking likely and that was when prices came under quite dramatic pressure a few years ago And if we were to get absolutely full that has never happened before So just the idea of that approaching and given the rate of which now This as you can see this bar chart these numbers are rising That is all but inevitable and the problem you have of course is we're in a Extended lockdown due to the health pandemic of coronavirus at the moment So the idea being here is that although OPEC have cut this deal You know the ability for them to react in terms of on the supply side quick enough and There's been some talk about them bringing those forwards and doing it more soon But also as well this natural kind of offsetting of production in America It all can't happen quick enough because of the expiration being today was the problem we had yesterday The other thing as well and a few other things to be mindful of that probably Exasperated this move. I've just switched over my chart now, and I'm looking at something else So for one hedge funds When net purchases of petroleum futures and options for the third week running last week Now what we're looking at here is the largest crude ETF known as the US oil fund It received basically billions of dollars in fresh funds In the most recent week accumulating a fifth of all of its outstanding contracts in the May futures contract But last week what we had it rolled its position because given we have these monthly Futures explorations in oil it rolled from May until June and that meant that all of that massive Kind of ownership of these contracts by the the US oil fund ETF then evaporated from May because it shifted over to June and That coupled with retail vestors in particular We're trying to pick the turning point and oil, you know, obviously getting caught quite badly there on the back of this so What does this mean? I mean going forward? I think what's Well first of all what's a mechanism that people can do to try to counteract this now from the forces that be whether it be Trump or These oil producing nations well for one President Trump responded to these negative Prices he spoke from the White House yesterday in a press conference and he plans to fill The spare space in the SPR the strategic petroleum reserve And by saying he would look into a proposal to stop shipments of Saudi Arabian oil That are currently en route to the US because remember when it gets to the US where are they going to put it? And that's only going to force this kind of extreme contango situation even further Can OPEC help I guess that's going to be a question that some people might ask and the point being is no I mean the OPEC deal that they've struck OPEC plus plus these kind of G20 energy producers The problem is if they doubled down and let's say they take this 9.75 OPEC kind of cut and they went to 18 million let's say and that previous discussions We had about supply and demand that definitely then brings down the supply side But the problem is forget supply and demand the process is Where are you going to park this oil? It doesn't address the issue that we were just looking at here, which is cushing is nearing It's full capacity Whether OPEC cut that or not that's not going to change that situation So for me what I think is quite interesting And I have heard a couple of big banks talking about this as well Is there could be further turmoil in the oil market to come over the coming weeks and the June contract? Could be next to see a similar episode to what we've just seen in a few weeks time and I do you think that Perhaps quite likely that going to be the case because if you think about it the Demand situation given the ongoing lockdown We're likely to go through globally as well as in the US and it's going to be so phased and graduated in that opening Up of the economy. There's not going to be a demand bump any time soon And so therefore for me this exact same situation quite likely might well reoccur when the US oil fund the largest Crew DTF rolls over from June to July and then the June contract has the same issue because at that point as well We'll probably be in even the worst situation from a storage point of view So hopefully that gives you an overview and makes a little bit more sense Like I said jump on the YouTube channel if you go back on to our channel Obviously love it if you subscribe join our community But if you just jump back to here watch us have to oil prices and you can see will explaining this And this idea about you know, what is contango? Why is it different from normal backwardation and all these types of ideas and why did it happen specifically yesterday? He goes over it and the great thing is he's got his ladder and you can see the tape moving and as it was all unfolding So it's a really great piece. So yeah gonna leave it at that for the moment Obviously any questions just just let me know But quickly gonna fire through a few other headlines because I want the focus to be on the oil move because I think that warrants a Warranted a bit more of an in-depth explanation The other thing that a couple people have mentioned is Kim Jong-un I've already kind of given you my top-level thoughts about how important I think this is basically the succession risk Is what people are a little bit nervous about? The US is seeking details about Kim Jong-un's health after receiving information that the North Korean leader was in critical condition After undergoing cardiovascular surgery last week He hasn't been seen I think his number of public appearances has been down He hadn't been seen for a number of weeks and so on and so forth to Cospy in South Korea was down overnight I think it was down about 3% so you know a little of reaction there in the local market as well other things IBM They came out. They're one of the biggest companies to have reported so far in the season post the banks that we saw last week Their shares were down about 3% in the aftermarket reaction. They're about down 10% on the year Essentially a drop in first quarter revenues. They pulled its profit forecast for the year So again, it's kind of a reality of the situation. I guess at this present point in time On that point of earnings, I know it's a bit small. So let me just talk you through it There are a few things we're looking out for today on that side. So in chronological order Some of the bigger companies to look out for ahead of the opening bell Coca-Cola, they'll just be ahead of Midday in London. So just ahead of 7 a.m. If you're in New York You've got Emerson electric Philip Morris Lockheed Martin. They're probably the bigger names coming out Pre-market and then aftermarket probably one that normally captures a lot of the headlines because generally it sees quite hard high price movement in the aftermarket hours is Netflix Netflix they're going to be coming out and reporting after the closing bell They're expected quarterly PSA dollar 64 quite quite amazing really Netflix market capitalization these days is just under 200 billion That's about the same size as Coca-Cola which is pretty mind-blowing when you think about it, but Just the nature of those kinds of new breed of stocks, I guess in that sense All right, Canada wise what have we got today? This morning a couple of UK numbers already have come out Again, these are backward-looking. These are February numbers for UK unemployment. So really don't matter at this point Obviously, I've been reading the press this morning getting prepped for this this kind of briefing and a lot of people are focusing on the OBS And they're forecasting about the variants we could see with second quarter growth in the UK And it's going to be pretty diabolical like there's like what we're going to see in the US multiple double-digit percentage losses for Q2 He's going to soon become a reality But from an unemployment situation the numbers this morning of February So it's not going to really contain the impact that we're looking for to really get a better sense of how bad the situation is going to be We get the ZEW economic Sentiment reading generally quite interesting from Germany, but we've already you know, we kind of focused on iPhone The ZEW is the analyst an economist outlook over the next six months could be something to just see how Basically how bearish people's view has become but how market moving I'd say probably to a lesser extent And then in the US session not a great deal going on to be quite frank I mean if if you're trading the loony you've got cab retail sales, but pretty quiet on the US front Existing home sales. You've got the weekly all infantry levels, of course And this is kind of again has been something which has only made the situation worse and led to the event Which we had yesterday because you know if you've been tracking those Infantry numbers which come out week to week obviously from the the DOE and the API We've been seeing these double digits sizable builds in the headline crude number and again That just perpetuates this problem that we have at the moment as we've just discussed So that that is really it. I don't we'll need To really go much more than that. I don't think so. I'm going to keep it brief. Hopefully the oil exploration helps As I said, if there's any questions, just let me know And yeah, I wish you all a great day ahead. All right guys. Take care