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4 Jul 21 2011 @ 10:55am by Matt Smith in Crude Oil, Economy, Global Energy, Natural Gas, risk management

Commodities, Darren Clarke, Chinese Diving, and the US Women’s Soccer Team

For this week’s meanderings, there isn’t a music or cartoon theme in sight, for today…we talk sport. This past week has seen a number of breathtaking conclusions to some spectacular sporting events, which of course, have sent me trundling back along the path to energy. So here are three of the previous week’s events, lined up alongside their commodity compatriots.

Against the odds, Darren Clarke won golf’s British Open last weekend. Not only did it come as a surprise because he finally won the claret jug after 19 previous attempts, but because he was considered such an outsider (125/1 of an outsider, as it goes). How does this tie back to energy? It highlights how low probability situations can still occur. This is something we should remember as we slowly creep towards the peak of hurricane season in the first half of September.

We may have only seen three named storms in the Atlantic in the first fifty or so days of a predicted above-normal hurricane season (Arlene, Bret, and now Cindy, take a bow), but past performance is not indicative of future results – any financial advisor worth their salt will tell you that. It only takes one hurricane in the Gulf of Mexico to inflict substantial damage to the approximate 12% of domestic production yielded from there. And as runner Oscar Pistorius showed us this week: just because something is against the odds, doesn’t mean it can’t happen.

Next up, we move onto twists and turns, and specifically, Chinese divers at the World Aquatic Championships. Rather than discussing the obvious – a market that is diving – let’s focus on something else: the current gold rush that the Chinese team is on. This couldn’t be more appropriate given that gold prices have reached a new record this week. Whether the buying interest for gold is spurred on by an inverse relationship to a weakening US dollar, a flight to safety, or as an inflation hedge, the appeal of gold remains untarnished, despite its lofty new level. As the below chart from Bloomberg illustrates,  the current US debt woes are only exacerbating the move higher in gold:

Finally, we turn to the ups and downs of the US women’s soccer team in their recent quest to win the Women’s World Cup. The excitement of their incredible win in the semi-final versus France was only matched by their bitter disappointment of losing the final in the cruelest fashion – in a penalty shoot-out. Even the fantastically-named Hope Solo couldn’t rescue the US.  

As for the commodity compatriot to this situation, crude has had a similarly turbulent time, sequentially experiencing daily rallies then retreating recently as markets remain choppy, yet indecisive. The best analogy I have for the current market was used in The Oil Daily this week  “Each day seems to be like ‘The Karate Kid’ as it goes wax on and wax off. The market gains and then loses and then gains and then loses”.

This pattern has just broken as hopes of a resolution in Brussels to the European sovereign debt crises has spurred crude to re-test $100. But once this news is digested, we will go back to choppy trading in the high $90s. 

I’m not sure what is on the sporting calendar for this week, but I doubt it will be as cut and thrust as the one just past. But fortunately for us, week in, week out, commodity markets remain just as nutty.

4 Comments on this post:

  1. Mark Sullivan says:

    As good as you are Smith ( and this is a darn fine piece by the way), I am yet to be convinced you can catch a fly with chopsticks.

    This one is trending on Linkedin apparently.. Whatever that means.


  2. Matt Smith says:

    Trending on Linkedin!! Awesome! (I have no idea what that means either…but am sure it’s a good thing).

    I accept your chopstick challenge.

  3. Mark Sullivan says:

    We can start you on Horse flies young padawan… I’m on gnats these days.

    Top weekend bud.

  4. Heaven says:

    No complaints on this end, simply a good piece.

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