MacroVoices #529 Ole S Hansen: Commodities in The Wake of The Iran Crisis

[music] This is MacroVoices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. MacroVoices is all about the brightest minds in the world of finance and macroeconomics telling it like it is. Bullish your bearish, no holds barred. Now here are your hosts, Eric Townsend and Patrick Suresna. MacroVoices episode 529 was produced on April 23, 2026. I'm Eric Townsend. Saxo Banks chief commodity strategist, Ole Hansen returns as this week's feature interview guest. We'll discuss what comes next in the Iran conflict, what the longer term implications are for energy markets, what's coming in food inflation and how to trade it, and a longer term outlook for secular inflation. Then be sure to stay tuned for our post game segment when Patrick's trade of the week will explore how to position in crude oil using options on longer dated crude oil futures in order to reap the benefits of backwardation by capturing an entry price well below the current front month price, something Ole Hansen will explain during the feature interview. And then we'll have our usual coverage of all the markets with Patrick's post game chart deck. And on Patrick Suresna with the macro scoreboard week over week as of the close of Wednesday, April 23, 2026. S&P 500 up 164 basis points trading at 71.38, continuing to press 52 week highs. We'll take a closer look at that chart and the key technical levels to watch in the post game segment. US Dollar index up 56 basis points trading at 98.60. The June WTI Crude Oil contract up 591 basis points trading at 92.96, back into the 90s after last week's dip. The June R-Bob gasoline up 797 basis points to 3.25, pressing back to 52 week highs. The June gold contract down 147 basis points trading at 47.53. The May copper up 82 basis points trading at 6.13, the April Uranium up 64 basis points to 86.75. And the US 10-year treasury yield up 3 basis points trading at 4.31. The key news to watch next week is we have the Bank of Japan, ECB and the FOMC policy rates and statements, the core PCE inflation numbers and a large number of key earnings releases. This week's feature interview guest is Saxo Bank head of commodity strategy, Oli Hansen. Eric and Oli discussed the broad ripple effects of the Iran-driven energy shock, why tightness in refined products and commodity inputs may be underappreciated, how extreme backwardation is creating powerful return tailwinds, and why fertilizer shortages and supply constraints across metals and agriculture could drive the next leg of the commodity cycle. Eric's interview with Oli Hansen is coming up as macro voices continues right here at macrobuses.com. And now with this week's special guest, here's your host, Eric Townsend. Joining me now is Oli Hansen, who heads up commodity research at Saxo Bank. Oli prepared a slide deck to accompany today's interview, so I strongly encourage you to download that as we'll be referring to those slides over the course of this interview. The download link is in your research roundup email. If you don't have a research roundup email, it means you're not yet registered at macrobuses.com. Just go to our homepage macrobuses.com, click the red button above Oli's picture that says looking for the downloads. Ola, obviously the big story is oil and Iran, I shouldn't say oil, it's energy generally and Iran and other commodities that are affected by this whole conflict. We just had a dip, which hopefully many of our listeners were listening last week when I suggested there's going to be a big dip that came on Friday morning. Hopefully people bought $79 crude oil when they had the chance to do so. You've missed that opportunity if you didn't do it then. Tell us your perspective on the big picture of what's going on with energy. How long this is likely to last and what we can expect for energy markets out of this conflict? Well, hello, Eric. I'm thinking very much for having me back. I think there's no doubt that even though the market is behaving relatively benignly, especially if you're just watching front-pons, the futures price in the crude oil market, but you will be saying what's the whole fuss about. This disruption we're seeing right now is just so profound because it's not only the energy space that we are seeing being impact. One thing is crude oil, but another thing is the oil to refine products where we really see the tightness right now, diesel, jet fuel, petrol chemicals and so on. But it's also the associated impacts because I think many were probably not aware how the importance of the Middle East besides energy production, that in recent years the Middle East has obviously expanded its production base in YGSL oil out of the ground and sent on the ship when you can actually make some money on the process of refining these into other areas. And that's why we suddenly left with a market where, besides gas, obviously, which is a Catana and a major supply to the global market, we have all the associated productions of commodities that takes place in the Persian Gulf simply because they have an abundance of cheap energy available. So the energy intensive commodities, that's anything from aluminium to especially fertilize, which requires a lot of gas, which is the main feedstock. They have become key issues. Recently we just come to know as well that the miners in South America then need sulfuric assets in order to break down the copper from their mines and that basically means with 50% of that coming out of the Middle East. Then we also suddenly face a potential shortage in that area we talked about. We, Helium, has been mentioned prior to the chips industry. So it's just a whole, the breadth of this crisis and how it impacts not only energy but anything through to metal, the sun, the agriculture as well. And a duration is really the one that we want us to try to work out because looking at the forward curves especially in the energy spaces in Crude Oil, you would imagine that you would think that this would be over by, well, within a few months. We're seeing still, we're seeing a very extreme backwardation right now, which basically is the price is further out, trades relatively cheap. If you look at Brent Crude, December contract is trading just above 80. And you could have, you can easily argue that having gone into this year with all the talk about ample supply, with the biggest supply glut in living memory as touted by the IAA, which potential was too high compared to where the market was actually, the signaling. We started, we traded the year in the 60 to 75 dollar range looking at Brent. And I think there is an argument that once the dust settles and we on the other side, of this, we should expect prices to settle in at least 10 dollar higher level, maybe even to 15 dollar higher. So the floor has moved higher for this. And that basically means if you're looking at Brent Crude for December at 80 dollars, that potential where the new floor should be. So I'm struggling to see any fault prices really reflect what potential will unfold in the coming months because it will take time. It will be a logistic nightmare. Ships are not in the right place. We have refinery damages. We have wells that need to restart it. But before they can restart, the oil tanks need to be reduced. The inventory levels has to come down so that the tanks can free up space for the production to restart. So we're usually looking at two to three months from a piece deal before we can start to talk about any kind of normalization in my book. And this is getting a little bit long, but I think also interesting to note that in the last six weeks, how much has the US crude oil production risen by zero barrels? How many additional ricks has been employed in the US shale area, zero ricks? Basically, where are the US producers? Why are we not seeing any response? And I think part of that is clearly the fact that the curve is very backwardated. So if your oil producer needs to hedge your production three to six months out, the prices are still not that great. And simply maybe also just raising question, are we getting close to a saturation point in terms of how high US production can actually go at the stage? So you mentioned backwardation, and this is something I've really been surprised by over the years, even among professional investors, people who are not professional commodity traders, seldom understand how important term structure is in commodity trading, particularly for position traders who hold a position because of a macro viewpoint for several months to several years. You can make money in a down market and you can lose money in an up market depending on what the term structure is. You're probably the only person I know who's put a chart together that really clearly explains this. So let's jump ahead to page four of the slide deck. So I want to go back to what I just said a moment ago and ask you to explain it because it sounded crazy. I said you can actually lose money being long in an up market and you can make money by being long in a down market depending on what's going on with the term structure. Explain how that's possible. Simply because if you are a passive long investor, Eric, almost no matter how you invest into a commodity space, whether it's through an ETF or through a swap, whoever provides you the ETF or the swap will always go back to the clean market and the clean market in in this case is the futures market. And if you have a market where which is backwardation to IED, it's a signal relatively tight supply and you're holding a futures position to hedge your exposure to the ETFs and the swaps that you have issued. Every time you roll that position if we iron backwardation you will be selling an expiring contract at a higher price than where you buy the next. That is giving you a positive roll yield over time. And the opposite occurs if you have an entire period with ample supply where a spot prices or the first few months is cheaper than the next then you will be selling low buying high. That's basically one of the reason why natural gas is such a dog to trade from a long-term perspective because the return there is just so difficult to achieve because it's long periods of time during a calendar year. We have periods where natural gas is trading at really steep contango. Basically when we're moving out of peak demand into lower demand season where we have this very we move from a very high price to wincent to a very low price during the summer that period is just killing you if you're trying to just be long because you're constantly selling high and buying low. But how does that impact you as a real returns and that's really where it starts to get interesting because one thing is that there's a lot of investor looking at commodities from that perspective saying well the outlook potential looks good for commodities. We need to have some hard assets in our portfolio but we don't want to get killed by a potential contango. What I put up here on chart for slide four is simply the performance between the Bloomberg Spot Index and the Bloomberg total return index. The Spot Index is basically reflecting the movements in the underlying futures price and the total return takes these roles that I mentioned into account and we had a five-year period. Let's just do it in five-year cycles here. We had a five-year period from 2016 up to 2021. I could have gone further back so we kind of just hit the nail where we had the bottom in 20 but let's just fire them and say those two those five years. During that time the Spot Index actually indicated that if you had bought an investment in commodities tracking the Bloomberg commodity index you would have made 52 percent but your actual return was only 14. That massive difference is basically because we had a period a number of years where most margins were trading contango based there was ample supply. We come out of a period where producers had respondents who had higher prices in the past and we also had the recession that a weakness that in the economic outlook that was under holding demand out. So basically we had a market that was ample supplied fast forward to the last five years from 21 to 2026. Once again if you look at the Spot Index the yellow line it is based more or less performed on the same performance up 57 percent against the 52 in the previous five years but if you look at the total return you actually up 83 percent. That is a massive difference in the performance of your investment and that's why backwardation is so important to keep an eye on and if we are seeing a future where we see tightness emerge across several commodities and that backwardation will continue to be present then that would basically provide an investor with some tailwind besides the actual movement in the price. Now coming back to the oil market I want to jump ahead to slide seven in the deck where you show a forward curve chart. Now for people who are not commodity traders might not be familiar with a forward curve chart. This is not showing the price action over a period of time. This is one snapshot of one instant. The price is not just a price. It's a bunch of prices. Explain what the forward curve chart is showing us on the left here and particularly that's a lot of backwardation and what we just saw on the previous chart was the more backwardation is the more that that actual realized return exceeds the return on the underlying spot price. So what does this all mean for crude oil investors and boy look at the difference between the front month and just say the December of 26 contract. That's huge. Indeed Eric and it reflects several things but first of all it does reflect the fact that we have the wall we have the tightness which is mostly impacted which starts at the very spot. That's why we if we added some like data print which is the the price that the barrels are exchanging hand, the physical barrels are exchanging hands in the North Sea then that would be trading at an even higher price. So it's basically a very backwardated curve because the stress is in the front end of the curve because that's where we have the tightness and where we have the worries about whether next barrel is going to come from and that's driving this kind of curve structure. In addition to that there is also speculative elements and I've highlighted that on the on the right hand side but basically where we look at what managed money so that's hedge funds and CTA so how they position themselves in the oil market. And we come out of a to start of the year basically you can see that we literally had a net short position if you look at the doublety and Brent combined. I can't recall have ever seen hedge funds being so weak in terms of the position. Started moved into the year and then suddenly basically it really took off and you can see primarily it was Brent that took off. Brent is the more reflection of the global situation and where do hedge funds buy into the into the market they do that at the front end of the curve simply that's where the liquidity is best so that's also underpinning the front end and driving up the the back position. So some of it is related to tightness but also some of it relates to speculative interest and that's also why we see these five to ten dollar corrections we've seen two now in the last couple weeks and that's part of that is most certainly driven by by specter is having to get out of long position because we have to remember hedge funds if there's one thing they're not they're never ever married to their positions. If something goes wrong if there's a technical change or fundamental change they will seek a divorce as soon as possible where as the rest of us potentially can sometimes get up into a position where we we think we write and the market is wrong but hedge funds they respond when there is a change in the in the market and that's that helps add to some of the the volatility we see at the very front end but also just a refuturning to the steepness of the curve that does obviously mean right now when we're moving now from the June to the July contract in Brent and more or the same in in double site you're basically going to pick up five dollars so that they would be rolling out out of it 95 buying back in and 90 and if the if the on if the market in the months time is still unchanged that we still have tightness and we're back to 95 then basically that was that's your five dollars that just come in and there's an additional game so without the curve that's really where many of the producers they're operating and that that's where they're looking if they they need to hedge their production further out and if we if we imagine that the new flow in Brent is is closer to 80 than than than 70 that as it was just a few months ago then you can see further out that we we dip below 80 at two levels where which potentially may not be weren't given what we though how the world has developed in the last three two months where we've basically seen a massive reduction in in the overhang of global supply we're seeing more than half a billion barrels of production that has not it's not been lost but has not been produced and that's really tightening up the global market SPR's for cheating reserves needs to be rebuilt and that basically also means there's an additional lay of demand into the market so I'm just basically questioning about how soon and whether we are going to see a significant drop back below 80 when we get through this this current crisis well let's talk a little bit more about that because what this curve of the left slide of page seven is showing us is about 12 12 and a half dollars of backwardation between the June contract and the December contract so that means if you bought the December contract and waited for it to come to expiry in six months you'd be making 15% on that investment in six months so what does that annualize to a whole lot even if the spot price stays exactly where it is it doesn't go up or down of course somebody might say oh but wait a minute that's just because of this situation which is about to blow over I mean the president said on TV it's going to be over any day now well hang on a second I'll let this began in February by the time this episode airs we've got one week left in April before we're into May and we haven't even seen the beginning of the disruption yet because the tankers that left the Persian Gulf at the end of February are just now arriving at their destination so the big disruption of supply is only about to start and go on for at least six weeks so you know how does this blow over to the point where oil prices are back to normal in six months I don't get it nope and I agree Eric and I think the only thing that really in the short term could potentially drive them down days if we see an extended face of long liquidation from hedge funds as I mentioned basically holding around 500 million barrels of of longs but I think a lot of that has still be initiated above levels where we are right now so so yeah there could potentially be a piece sell off but then once that is done I think the the mic was very very quickly turned around and asked the hard questions when is the normalization going to occur and then that that's really when I think we we will come to the conclusion that it's not going to happen anytime soon and that basically means that we we will have to live with with higher for longer in in the oil market and as you mentioned if around 18 December the longer takes the more we will move towards the the actual current level so that that's why the the the back that's the beauty of backwardation hard work so what time and just looking at Brent on on Friday we drip we we dipped all the way down to 77 and one could argue that below 80 there is some some value to be found in in Brent basically based on on the fact that this is going to take a long time to to solve itself out I want to move on now to another potential trade opportunity that I think might be even more ripe than the energy trade because let's face it even though it's resulted in this steep, steep backwardation. I mean, the front month has been played here. It's priced in. Everybody knows that there's a war on. Although, frankly, I'm not sure it's priced in as much as it should be given that so many people seem convinced that this is ending when I'm not persuaded that it is. But I want to come to something that I don't think has been priced hardly at all yet, which is it seems to me that the fertilizer deficit is near certain to result in diminished crop yields next year, because you know, it's planting season right now. It's everything I'm reading says that American farmers, and I'm sure it's probably the same in Europe, the farmers can't afford or can't get their hands on enough fertilizer to fertilize the crops as much as they normally would want to. So they're planting under fertilized crops seems to me like that can only mean undersized yields that presumably results in higher prices. Am I right about that? And more importantly, is that already been discounted and priced into the market? Or is that something the market isn't really pricing yet? It's priced in a certain extend area, but I think the reason why it has not significantly impacted the market at this point in time is simply because it's still too early. We are also a lot hinges on weather in the coming three months during the growing season across the Northern hemisphere. But if we have a combination of adverse weather and the fact that the amount of commercial fertilized that was available and it has been used, if you see a combination of those, we will see downgrades to crop production targets for this year. And that will start to eat into an overhang of supply because we are coming into this, just like the oil market, we're coming into this fertilizer crisis which we can call it with ample supplies of some of the key crops, soybean, corn and wheat. But it really only takes one bad season for that poll equation to change around. And that's really the worry in the coming months that if we see some trouble with the potential as well, we already know in the US. And that's why the US National Gas is dirt cheap because we've had a very mild end to the winter, but also a very dry start to this season. And that basically means something like wheat prices are struggling. Our wheat crops are struggling in some of the major wheat belts production areas and that has already added some a bit to wheat prices. But wheat is one that is nitrogen intensive of the major crops. And the one that's least intensive is soybeans. And that's why we as well, we have seen that the response in the crop market being strongest, so far in corn and wheat prices, we have other associated impacts which is also lifting some like soybean oil. So the question is really whether we are, whether it's been nine performance we've seen in that agriculture now for the past couple of years, just looking at the agriculture sector as a whole in the last year. The total return on the agriculture sector has been 1.3 percent. Two years is only 5 percent. So it really has been bumping along near some multi-alose, some of these key crops, but the risk is clearly that the cost of fertilizers and adding to that also the cost of diesel into a system where farmers already struggling from having produced at low prices in the previous few years, that that will add to the to the pain. You could argue that across the northern hemisphere, as we were so close to the planting season when this started that fertilizers were not coming from the Middle East because it arrived in the US and Europe way after that the planting has finished and the need for the fertilizers was there. But so the focus is probably equest much on some of the near the regions closer to the Middle East in the coming months. That would be India, Africa, but also later on South America and South America has become one of the biggest, well, is the biggest export of key crops especially to China. All in all, it raises concerns that we are potentially facing higher food prices in the coming months. And that basically means that our metals were the driver last year. Energy was the driver to start the year, potential agricultural become another driver as we move into the second half and into into 2007. Now the challenge with agricultural commodities normally is they're typically contango markets, contango is the opposite of backwardation meaning that the price goes up over time and that just makes it very difficult to make any kind of bet on what's happening next year. Because if you try to go long next year's agricultural commodities, there's so much price premium that you're paying for buying in advance that it ends up canceling out. You don't make anything on the trade even if you were right. Have these markets moved into backwardation as other markets haven't this crisis? Not yet to the extent that we've seen in especially in the energy. If I'm just scrolling down looking at my one year and the one where we have the most significant backwardation right now is soybean oil. And again, that's the energy related story. Soybean oil has been in strong demand and now buy a fuel link to diesel. Soy oil is in backwardation wheat and corn still in 10 percent, one year, contango. And then elsewhere we have something like coffee we should actually in the decent backwardation as well. But generally as you said, Eric mentioned crops tends to be in contact. So just the mere fact that we're moving towards anything less than 5 percent which is basically reflection of the one year funding cost if you look at the dollar, then that basically means that we are moving towards a tightening market. So what we need for that to return to a proper backwardation is really just what we see. That's similar to what we're seeing in your oil market. That the spot market is becoming stressed because inventory levels are being drawn down and for worries of supply. And again, if not a situation now, I'd ideally like to avoid it because one thing I talk about gold prices, the dobbling, that's fine. But talk about wheat prices, dobbling, that's a complete different in terms of global food security and what it does to our donations. But it's one we cannot ignore simply because the impact of fertilizing and the lack of it right now. So key markets who are watching the coming months, I would say, let's go a little bit deeper on that. Suppose that my trade hypothesis is its planting season right now in the Northern hemisphere. Suppose I think this crop is probably not going to be as productive as prior years have been because of this fertilizer situation. First of all, what's the right time frame? Would it be, say, December of 26 futures that I would be looking at to try to trade the outcome of this year's planting season? And because of the contango that you described, it seems like we got to figure out how to hedge that somehow. So what would you think about something like a pairs trade, long wheat, say December 26 wheat futures, short soybeans, basically betting on the more nitrogen dependent, more fertilizer dependent market outperforming the non-fertilizer dependent market of soybeans? That could be a way of expressing it there. If it's purely the nutrient balance that we are looking at. And it is interesting if you look at it and you mentioned where we're on the curve and really depends on whether we should include the next Brazilian harvest. Obviously wheat is not a major product in Brazil. So it's mostly in the Northern hemisphere and then later on in Australia as well. But if you look at December or the current front months in wheat is trading just above $6 a bushel. If you look further out, which is the new crop, which basically is concentrated in the December contract, then we're looking at a price currently at just below $6.40 per bushel. So there is this contango. But if you do see the market start tightening up in the coming months, then December, then the December contract out there will start to increase. And we also seeing just March next year trading again quite a bit higher. And that's when we start to take in the Southern hemisphere, if you harvest into account. But generally, if you're looking at not this harvest or not the present situation, which is basically anything you trade right now with in terms of front month, that's basically what's left. You're trading what's left in stocks around the world in inventory. If you want to trade what's coming out of the ground in the coming months, you will be looking at December corn, December wheat and November soybeans. Let's move on to the longer term effects of this crisis situation. One of the things I've been fascinated in the study of inflation is the extent to which it tends to be a self-reinforcing process once it gets going. It seems to me, well, frankly, I thought we were headed into secular inflation even before this whole Iran conflict came about. But it seems to me, if we weren't there already, we ought to be by the time this is done because the effect that this is having on energy prices, I think, is going to send an inflation signal into the economy that's likely to become self-reinforcing. Do you agree with that? And if so, what does that mean for commodity trades? Commodities will be a major input to that risk. And as we talked about it, because the broad nature of the current stress that we are seeing, it's not only energy and fuel markets is also spreading to some of the metals and some of the food commodities, then the impact will be felt. And yeah, it just raised the question where to be positioned in such a scenario. And I think just simply looking at the commodity space, how it's recovered from the pandemic low in 2020 and how we base since then has risen almost 200%. If you look at the Bloomberg commodity index once again, actually 160%. Then the underlying reason for holding hard assets, I think the argument for that probably has only been strengthened by developments in the last month because we are increasingly facing a world where we're moving from, I don't know if whether it was Jeff Currie or one of the others that you had on the show recently, that they say we moved from a just in time to a just in case world where the economy is basically the disruption we're seeing to the global trading system, to the breakdown in normal relations. It basically means that we are much more focused on having ample supplies instead of just having enough supplies and being reliant on supply chains being able to deliver, so you don't run into any shortages. And that basically means that that means that there will be demand for, that will drive demand because inventory levels needs to be kept around the world at higher levels than it was in the past, because of this change in the way we look at the world. And then we'll have to see how that feeds into some of the darlings of last year, which I think is basically just right now, just taking a bit of a breeze or some of the metals. I see the gold market just consolidating right now. I think we actually seeing some of the macro tailwind starting to return, but as I mentioned before, the speculative community, especially hedge funds, they don't have a cycle here. We're basically just bashing around bit anguously around that $50, 50% retracement of the big sell-off from the highs to the low. We had last months, which were ended up at the 200-day movie average, which was quite a strong level of support. But I think once we're on the other side of this, we'll start looking at some of the reasons why we drove these prices up in the first place, have not really gone away. And if we had that with the risk of high inflation, if we had that with central banks having to stop between two, sitting between two chairs, you know, focus on inflation, I should just focus on economic support. I think that's still, and then the whole fiscal debt situation, which is anything worse in the last six weeks, that basically still points back to investments in hard assets where gold is one of the go-toes, but also the energy sector, simply because we're going to see a higher floor than we saw in the before, that will benefit energy producers. The recovery that we started to see in the energy sector last year was actually, obviously, as accelerated, which may go through a porcelain consolidation. Now, if we do get a deal, what we're left with is the fact that higher prices will be higher going forward, and that should be benefiting the earnings. So again, the energy sector and all the producers, also the sector, we think, would benefit in the future. - You mentioned in the course of that answer that we're up about 160% in this cycle since 2021. I want to go now to slide three in your deck, where you talk about the super cycles that commodities tend to trade in. Looking at this slide here, you know, the 1970s were a famous bull market in commodities and bear market and almost everything else. It seems like there's a strong correlation with that famous inflation of the 1970s there. These cycles seem just from the looks of the slide here to last about 10 years, were five years into the present one. So does that mean we're halfway done, halfway there? What should we expect in terms of the current cycle? Where do you think it's headed? - Well, I think we're heading higher simply because what can we call this third wave? I think we can probably call it the energy sensation simply because of the increase. We're still in a power hungry world that we're at demand for power continue or energy continues to go up. It's increasingly focusing on electricity. We all know some of the major culprits for that increase in demand. And then we need to make sure we, in a situation where we can conduct all that power and that is just very commodity in census. Again, I think that's actually a phrase that we have. The old world is striking back against the new world because the new world wants to accelerate at 100 miles an hour towards progress, but the old world is bumping along at a much slower speed because they can't keep up with the demand that is coming from all the different, all the new technologies and all the direction that we want to go. And I think that basically even in a situation where this, the old saying that the best cure for high prices are high price because it incentivizes supply and it also impacts negatively the demand side. I think that is still obviously relevant in many areas, the most striking one recently has been cocoa prices, which went from 2,500 to 12,000, only to utterly collapse back to where we came from. Simply because there was a response both from the demand side would slow and the supply side would increase. But I think if you look at some of the, both the energy and the metals based, what we're missing or could be missing in such an hour is simply the supply side, not being able to respond to higher prices. And that leaves us in a precarious situation where prices could actually still go up even though economic growth is not great or potentially not at levels that we could miss. It's simply because the demand for many key commodities is at a level where the physical world is struggling to keep up to deliver all that material and energy that is required. So I think we are, perhaps we are halfway through, but perhaps it could last even longer, it depends really on the speed of it. And I think if anything, what we learned from the 2022 war in the Russian invasion of Ukraine was how the renewable sector obviously had a massive boost in the months that followed because the realisation that we need to be less dependent on fossil fuels. I think what we were already seeing signs of that re-emerging now with the very high energy prices we have, that so we are seeing parts of the power sector or that part of the energy equations having another renaissance. And that again will just speed up the process in terms of tightening some of the markets that deliver the materials and commodities that's required to sustain this energy transition. You also mentioned gold a few minutes ago, so I want to move on now to page nine in your deck where you're talking about gold here. It seems like some very fascinating things have happened. Gold normally functions as a geopolitical hedge, so bombs drop, gold goes up. Something flipped like a switch, Ola, at about 11 p.m. on March 2nd, where all of a sudden, bombs drop, gold goes down. What happened there? The market panic, and when the market panic, it's a question of disconnecting out of positions or getting reduced to getting exposure down to levels that you find that's manageable. And so gold to some extent, to some of the other metals, well, suffered from the success that had in the previous months, so they become very widely held investment, meaning that they were also exposed when that situation unfolded. And we've seen similar situation, the liberation day last year, it was not the exam, but it takes some of the major crisis we've had in the last 30 years, the dot com bubble, the global financial crisis. So we've had a couple of others. The initial response in gold has quite often been a sell off, only to recover very strongly, making new highs in the months and quarters that followed. And I think it should not be taken as a surprise that when we have such a major event that gold is struggling at least in the short term, and then the depths of the correction, $1,500, which is pretty insane. But then again, just looking at the chart, it's not, simply because of distance, we traveled in the months and quarters, up until that peak point in the back in January. So we could, we could correct the $1,500, we found support on 200-day moving average, we're now just treading waters. We've gone from a bit of a liquidity and inflation shock, perhaps now more towards a growth shock, where the implications of this crisis will start to play out in the coming months in terms of soft economic growth. And with that also, the central bank struggle business between focusing on inflation on one hand, and perhaps so focusing on economic stimulus on the other side. And I think that that will eventually send the gold prices higher again. But for now, we are consolidating, and it's really just, if you look again on the chart, it's literally just around the 50% retracement of the big sell-off. So it's a natural point for the markets who consolidate and try to gather what's gonna happen next. So I see more of the side we're trading in the coming weeks, but I think the foundation that was late and sold in the previous years for this multi-a-ball run has not suddenly died a sudden death. The correction was necessary. It was becoming, especially in silver, becoming completely and obviously unhinged. But now the market has had time just to reflect. And I think over time we'll start to see prices go back up again. - Well, I very much agree with everything that you've just said, but there's one big caveat or fear that exists in my mind, which is, boy, we've really seen that at least since March 2nd, gold does not like the idea of an oil-driven inflation signal. And the problem I have with this chart is it seems to be recovering as people are un-tannicking about Iran and the oil market. And I agree with you that I am not so persuaded that this is over yet in the oil market. I don't think it is. That makes me worry that another big leg down in gold could be coming, maybe even, you know, retesting or moving to a lower low below the 200 day moving average. At what point would you get concerned that, okay, wait a minute, it looks like at a certain price level, this thing's going the wrong way. It's time to maybe step out at gold for a while. - I would say if we start to break back, I'm gonna know the 500, 4,600 area, then I would also get a bit nervous. But I think what you said, the area beautifully reflects what the market is thinking. That we are trading sideways, yes, simply because our still traders and investors are having some concerns about what may happen next. But I think also we also just need to keep an eye on the dollar, even though the movements in gold is much bigger than the movements in the dollar. It's still a sense of strong signal. And we just gone through a massive amount of dollar short covering which led to a, we've gone from a multi-year big short position. If I look at the week, the cut data covering futures price, if the IMM futures market to the biggest long in two years. So there's been a significant amount of dollar buying, which now seems to be tapering off again. And I think the low point or the recovery scene recently probably is also a sign that the dollar is time to send a little bit of mixed signals with time, season, weakness coming back in. I think that weakness will eventually continue. But again, if we see a further escalation, then the dollar could again be the go to save haven, at least the liquidity, save haven, in this room. And that's probably the biggest risk that another major escalation could lead to that and leads to another round of general and broad liquidation. So yeah, it's a two-way market right now. And I think it's a question of probably being a little bit patient here. You know, as I look at this chart on page nine, boy, what a beautiful, great big rally that was from 2024 all the way up to the peak just at the beginning of the year in January. But oh, it's been so painful since then. It makes you wish that you could have maybe a little bit less upside for the sake of more stability. Well, hang on a second, even though it's gold and silver that everybody's talking about, let's move on to page 11. That suddenly looks like a chart that's exactly what I just said. It's a really solid uptrend, maybe not quite as steep, but without the profound volatility that we've seen in precious metals. And of course, that's copper. And I think the fundamentals are a lot of speculators love gold, but the real economy needs copper. Is that actually the better trade to speculate on instead of gold? It should be the less volatile trade because if copper price suddenly doubled, then you would also have some problems with some of the big projects that requires copper. But I think the direction is pretty clear. We've gone through a correction. I actually used a weekly chart. But if I put in a daily chart, that low point back in March was exactly the 200 day moving average as well. So some technical support emerged at that area. But since then the recovery has been quite strong. And again, copper is not only a question about demand, it's most certainly also a supply story. And what I don't think we knew of realized was that the miners in Chile, Peru and Congo and all the places they need sulfuric acid in order to break down the copper and to release it from the underground. And suddenly we've come to realize that 50% of global seaborn exports comes out of the Middle East. So partly a story about the recovery in China. I'm actually showing that on the next slide on slide 12. Well, we see that despite having seen a massive surge in exchange monitored copper stocks, inventories both in London and New York and Shanghai. Copper price actually held up very well. And what we've seen recently is that the total number of stocks has started to come down, but it's actually coming down pretty hard in China. So market is taking that as a sign that has been some pent up demand in China, which still remains by far the world's biggest consumer that has started to emerge after we saw the corrections. It does tell me that the price is a copper price, our response to price changes. So maybe a little bit too expensive last year, at least producers had to or users of copper had to get used to it. And once we had the correction, they came back in and the result of that is sharp drop in inventory levels in Shanghai. They are now paying a decent premium to import copper. That's the red line. That's the premium they're paying over London. And that indicates that the demand side is starting to recover in China. And then at the same time when you have the supply side struggles, we had multiple disruptions last year, but then you have such a basic thing as a chemical that's required to actually ensure that the production can take place is another major factor, which is on the pending copper. So I think that both of these will continue in the coming years. Suppliers will, the miners will struggle and demand will remain robust to rising. And the biggest stories in commodity markets in recent years has been this just crazy move in cocoa prices, which chocolate lovers are certainly been affected by what happened there, page 13, what caused that massive, what was it quadrupling or so of more than quadrupling of cocoa prices. And it looks like we're back down to what looks on this chart like a pretty firm support level. As I mentioned, really just a complete classic response from the market to a rally that was triggered by production problems in the in the ivory coast and Ghana. At a time where prices simply had been too low for production to be maintained. And then we had two events of one with too much rain at one point and two dry at another point. And then suddenly the production was was a challenge and we saw this massive run up. But what do we do when prices run into the to the point of chocolate manufacturers. They start to look at reducing the number of cocoa content. That makes obviously the chocolate bar a bit cheaper to produce in some place. We also have strength. So the buy suddenly not the size that you were used to. So the combination of these things basically had a major impact on demand in Europe, which is one of the biggest grinders and with demand as it fell to the lowest since 2013 at some point. And combined with the with the extra the higher prices that somebody was starting to benefit the farmers in these areas, they responded by increase production to the point that now we have the reverse situation where too much cocoa is being produced. Demand is no longer a strong because producers have reduced the content. So we're now going for another painful process which potentially could lead to another spike in the coming years. Unless I think I read somewhere recently that someone's trying to was a Israeli company that they think they can they can replicate cocoa through a lap grown cocoa. I'm not pricey or how much we can put into that. This is just a classic example of how it goes through these various big cycles where supply and demand response to both lower prices and higher prices. We spoke earlier about where the trades might be that are related to the oil crisis but are less obvious and not necessarily priced in yet. Most people would never make a connection between oil prices or a oil market dislocation and cotton prices explain what the connection is there and is there a trade there. I think we've got a cotton chart on page eight on the right hand side. We come through a as you can see on the chart that we've been in a downtrend for cotton prices for quite a quite a long time. We had lower energy price and what is the competition for cotton that's in a synthetic fiber. That's a petrochemical derived product. That's where you have the link partly as well. I have to add driven by some some the drought that has underpin the winter week crops in the US has also been underpinning cotton price because this is New York cotton futures. They have also been supported by some dry conditions in the cotton regions but no doubt that quite a lot of that is also the substitution. If synthetic fiber goes up well then you can return to the real deal to the real cotton and that's underpinning prices. We have others where as we talked about the direct link between fuel prices is both biofuels. That's soybean oil but it's also ethanol especially in Brazil where the sugarcane is either used to produce biofuels. We have a lot of carbon in the world and we have a lot of carbon in the world. There is a direct link and that's why we see these movements on fold and when suddenly aquaculture responds to an energy development. I can't thank you enough for a terrific interview and I have to tell you how much I appreciate and really enjoy your work. You're one of the most insightful people in the commodity market and you publish a whole bunch of stuff for free. You make a daily podcast. You publish I think the best analysis there is of the commitment of traders reports which is the government data on who holds how much of each commodity. Tell us and let's take a look at page 14 in the deck. Tell us about the various different things that you produce and how people can follow your work. Thank you very much for that Eric. As you probably know, but now I work at Saxobank. I've been doing that for 18 years as head of commodities strategy. What we produce here is primarily as first and foremost produced on our platforms but also on our webpage which is the bottom of their home.SaxleForice. Otherwise when it comes to a little bit more quick and sharp small updates, I'm still quite actively on X and you can find me there at Oli on the score. On the score, the end is just as we can move that but yeah, so the reason also moved on to a sub stack. So multiple different ways of finding me. But the most up to date for now is on X and that's also where I link back to stories that are published on our websites. Patrick Sarasna and I will be back as macro voices continues right here at macrovoices.com. Now back to your hosts, Eric Townsend and Patrick Sarasna. Eric was great to have Oli back on the show. Now listeners, you'll find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrovoices.com. Go to our homepage and look for the red button over Oli Hansen's picture saying looking for the downloads. Patrick for this week's trade of the week, Oli contends that the market is underestimating how long this energy disruption is really going to last. The forward curve is already showing extreme backwardation and Oli explained in the feature interview how that spells opportunity for investors. So how do you position in crude oil with options farther out on the curve, assuming that you think Oli has the call right. As Oli highlighted, this is not simply a short-term geopolitical spike in oil. a shift in the structural floor beneath the market. The acute tightness at the front end has created pronounced backwardation, but the more compelling opportunity sits further out in the curve where deferred prices still appear under price relative to the likely duration of this disruption. So rather than chasing front end volatility, the trade is about positioning in the deferred part of the curve to capture both a higher equilibrium price and that carry profile. Now the most wrecked way to express that view would be through a long position in the deferred crude oil futures, but instead of taking outright futures risk, I want to introduce a symmetry into the structure, defining the downside while preserving meaningful upside convexity if the repricing higher unfolds. So this week's trade of the week, I'm expressing the views through a bull call spread in WTI. While spot crude oil prices are trading around $94 at the time of this recording, this structure focuses on the December 2026 WTI contract currently trading near $77.40 with approximately 211 days to expiration. Using the corresponding November options with roughly 208 days to expiration, the trade begins by purchasing the deep in the money $70 call for approximately $11.70 of which $7.40 is intrinsic value. To offset the remaining time value premium, I'm selling the $90 call for roughly $4.40 creating a $20 wide call spread for a net debit of approximately $7.30. What makes this structure compelling is that the premium paid is largely intrinsic value, resulting in break even near $77.30 essentially in line with the underlying futures price. In practical terms, that significantly reduces Vega exposure and minimizes time decay, effectively transforming the position into a defined risk high delta exposure with embedded convexity. Rather than paying heavily for optionality, you're primarily owning intrinsic value while financing the trade through the sale of the higher strike upside. From a payoff perspective, Max loss is limited to the $7.30 debit with a Max profit of $12.70. With almost no-carry cost, creating a favorable asymmetric profile while maintaining exposure to the deferred curve. The objective is simple. Use a capital-efficient bull call spread to express a higher structural floor and oil, capturing upside repricing with defined risk and reduced sensitivity to volatility. Patrick, every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14-day free trial at BigPictureTrading.com. Now let's dive into the post-game chart tick. All right, Eric, let's dive into these equity markets. Patrick, so far as I'm concerned, the ceasefire has mostly already collapsed just as I predicted that it would, but equities are shrugging off higher crude oil prices and continued to rally to new all-time closing highs on Wednesday. Despite the fact that it's pretty darn clear that the Iran crisis isn't quite over yet, and frankly, I don't think it's anywhere close to over. So as I explained when this all began, the usual wartime playbook starts with a big panic sell-off. Oh my gosh, there's a war on. Sell everything. Then people calm down and remember that wars are always inflationary and usually good for the stock market, even if they're bad for humanity. In many ways, it feels like that's what's happening here. The initial shock is over. We're used to this now. The stock market is rallying because obviously this means that there's going to be more spending on defense and buying more weapons and inflation factors and so forth. It seems like that's what's happening. The thing is an energy delivery disruption that threatens to halt the global economy definitely is not bullish for equities. The market seems to be convinced, and the market's usually more right than I am, so maybe I'm wrong on this one. But the market seems convinced that this is all going to go back to normal soon enough, and the risk posed by the continued closure of the Strait of Hormuz isn't as big of a risk as was first feared. I disagree. I think it's a very big risk, and furthermore, I think that risk is growing exponentially with every day that this continues. So my S&P hedges expired worthless on Friday, and I replaced them same day with a new put spread, 6,800 to 6,000 bear put spread on S&P futures. I don't think this is over yet, and you know, hey, if that too expires worthless and I give up all that premium as insurance cost, I would much rather have been wrong on that one, and I'll be delighted to watch those hedges expire worthless as well. Meanwhile, I'm happy to have downside protection in place because I think this is a long way from over, and I do think that the energy disruption is a result of the continued closure of the Strait of Hormuz is a big deal for the global economy and ultimately for the stock market. Now to be clear, if I'm wrong about the geopolitics, and it really does blow over in the sense of the Strait really and truly reopening, traffic can flow without disruption, oil tankers just go about their merry business, then it really is over, and I think the stock market rallies considerably from there when it's over. I just don't think we're there yet. Well, Eric, I want to speak to the technical levels. First of all, we had an extraordinary 23-day April bull run on the upside that has the market trading at a pretty overbought level on the upside, up 13% in over those 23 days. Now, we're trading along those 52-week highs. Now, what really drove this was a lot of systematic drivers. There was a huge flip back on the bull side by CTAs, ball targeting funds getting back in. So we've seen normalization. We are seeing a dealer gamma completely collapse, creating a van a tailwind to the upside of the market. So there was a lot of structural buying. We're now at a level where much of that structural buying is now rearview mirror. I think in order for the market to make its next leg higher, it's going to have to be driven by earnings. So what we saw was a substantial reversal of the prior six-month sector rotation. The Mag 7s came at the gate very strong. The QQQ went ripping higher. We saw a tech-driven advance on the upside of this market. So with the fact that we have the earnings of five of the Mag 7s next week, they're going to determine whether or not there's another bullish impulse towards, let's say, 74, 7,500 on the upside of the market. Now, again, that is defining the macro logic that you were referring to. But on the short-term liquidity and momentum may take this market higher. Overall, I think that once that exhausts itself going into May, we could see all sorts of potential reversal points. But at this stage, in order for us to have any serious technical damage, we would need to see over a 5% drop in this market at this point to really start reversing the flows that have really driven this market higher. So while I'm not too optimistic about the asymmetry of the opportunity in terms of how much upside there is on the market, there also doesn't feel like the backdrop of an imminent market drop. So it's one of these things where we have to respect the prevailing trend and see whether the earnings can give it that extra impulse to go another leg higher. All right, Eric, let's touch on this dollar. Patrick, we still have a big unfilled gap on the Dixie chart running up to 99 spot 38 that's from after the ceasefire was announced. And I expect that to get filled shortly after the third US aircraft carrier battle group arrives in the golf theater, which should happen around the end of this week. So I think this weekend could be when the fighting resumes. But eventually, I think the dollar downtrend, and that, by the way, coincides with originally Trump said he was going to extend the ceasefire kind of indefinitely. And then he put a three to five day time limit on it. That's the amount of time it takes for the USS George HW Bush to circumnavigate the continent of Africa. They didn't go through the Red Sea and the Suez Canal, I think, because they were afraid of being targeted by the Houthis. So they had to go the long way around Africa that's going to take three to five days to get there. And it's coincidentally enough the ceasefire that Trump gave an extension to just happens to coincide with when the carrier Bush will arrive in the combat theater. I don't think that's a coincidence. Well, the dollar index has turned up and it's really being driven by the last few days of weakness in the euro. And to me, I want to continue to focus on that euro chart. The euro failed along the 118 level. And that to me remains a very critical line in the sand. If the current environment in Europe will inevitably lead to some sort of economic weakness, because of the geopolitical and macroeconomic backdrop, then a euro breaking down would almost certainly be the bullish tailwind that the dollar index would need to go higher. Will we see the euro we can back toward 115 as the thing on my radar? All right, Eric, let's just touch on crude oil. Well, once again, I question whether macro traders understand the lag effects in the physical delivery of crude oil. JP Morgan says that Iran can only withstand about two more weeks of having its crude oil exports blockaded by the United States. Now, it's not quite the same thing as the Hormuz closure. It's the US stopping Iran's exports. If that US blockade continues to be successful for more than about two more weeks, Iran will be forced to begin shutting in its oil production and after about one more month Iran would be forced to substantially shut in most, if not all, of its oil production because of a lack of any place to store the oil. Once shut in, those wells take a long time and cost a lot of money in order to bring back online. That means it's plausible that the US could resort, in a worst case, if they can't succeed militarily on other fronts, they could get into a weight-them-out game where they say, okay, we're going to, you know, weight-out Iran, force them to close in their wells which creates an economic collapse for Iran so they don't have to target civilian infrastructure with military strikes, which I hope for the sake of innocent civilians they won't resort to doing. So the length of time that the global energy supply could be affected by all this increases exponentially from here. And the reason I say exponentially is if you get to the point where Iran and other countries are forced to shut in their oil production, let's say we go two more weeks and there's a bunch of shut-ins. It doesn't mean that it extends the disruption for two more weeks. It extends it for the two weeks that it takes until that happens and however long it takes after they shut in that production to bring it back online, which could be months. So two more weeks of this could result in two or three more months of disruption of supply to the global economy, higher oil prices, stagnant economic activity, decreased profits, could be really bad news for equity markets and everything else. So it's important to understand if it goes on a few more weeks, it could be a few more months in terms of the resultant effect. And again, many other producing countries, not just Iran, would be forced to close in their wells. So if the US has to resort to waiting out Iran closing in its wells as a way to end this conflict without having to target civilian infrastructure, well, the consequence is going to be everybody else closes in their production. That means we could have six to 12 months of dramatically elevated energy prices globally, completely screwing up the entire global economy. So I say this is a bigger deal than most traders seem to be predicting. I could be wrong, and frankly, I hope to be wrong on this one. Well, Eric, we have crude oil continuing to trade above its 50 day moving average and found some critical support along retracement zones. So overall, while it was a deep pullback, it could have just been because oil was overshot on the upside and a few tweets were able to create this mean-roverting correction. But as the backdrop we've talked about is there, it will be interesting to see whether crude oil can muster up another bull advance back up towards its highs. The particular thing that I want to touch on, though, that's more interesting, is the fact that the pullback in our Bob Gasoline was nowhere near as deep as WTI. And while this multi-week correction on gasoline came down to the 290 level, we're back up to 52 week highs on gasoline. It'll be really interesting to see whether we have a fresh new breakout on gasoline futures and whether that's a leading indicator to the fact that crude oil still has some more upside ahead of it. All right, Eric, let's move on and discuss these precious metals markets. Patrick, I remain convinced that we're ultimately headed to new all-time highs and gold. But, you know what, tactically, I'm getting pretty darn nervous about this chart. It's looking more and more to me like lower highs and lower lows. It's developing a pattern here. And if I'm right about oil price-induced inflation, lasting longer than most people expect, well, that's going to be a longer headwind and a bigger, stronger headwind that is currently priced into the market for gold. I see 46.85. That's the 38.2% Fibonacci retracement as a critical level. A close below that suggests much more downside as possible and maybe even new cycle lows below 4100 could be in the cards. Now, to be clear, when the Iran conflict really and truly is over and the global energy system begins to return to normal, I think gold will rally and rally hard to new all-time highs. But that could be quite a ways off the way things are going. So I'm kind of waiting to see what happens at 46.85. We touched that level. It looked like we're about to trade down through it. And then Trump extended the ceasefire for at that point, it sounded like indefinitely. Now it's scoped down to three to five days. Let's see if we can hold above 46.85. If not, I start to get really worried about where we're headed next. Well, Eric, I have similar concerns about gold. So far, the entire rally that's lasted throughout April has barely tested the 50-day moving average in a Fibrotracement zone. And it seems very heavy like it's rolling over. The thing about gold is that we're seeing the exact same pattern on silver, platinum, and pladeum, including the gold miners themselves. So what we had was clearly some sort of a topping formation. And maybe there's still a little bit more correcting to go. I remain quite bullish long-term gold. The question here is, will the second quarter of the year be much more consolidation that creates the next compelling buying opportunity for a potential second half of the year rally? All right, Eric, let's have this conversation about uranium because it's been a relatively quiet for the last month. Well, we're seeing a nice brisk recovery in uranium miners and the stochastics and RSI on the weekly charts suggest that there's more room left to go even higher. So as long as the broad market risk off event doesn't spoil that party, I think the chart looks really bullish. The thing is, as I said earlier, kind of concerned about that broader market risk off event spoiling the party. So long as the broader market holds, though, I do expect more outperformance to the upside by uranium miners. The nuclear news flow couldn't be more bullish long-term. So I'm definitely super excited and bullish about this market long-term. But at the same time, I'm still concerned that the broader stock market will take the nuclear stuff down with it if it takes a big tumble. And I think that tumble could be coming if we get a reality check on how long this Iran conflict could take, not just to resolve the conflict with Iran, but for the energy system globally to return to normal after that. I think it's going to take longer than a lot of people think. Interesting part about uranium-eric is that it is structurally being accumulated. It is making higher highs. It's crawling higher. But we haven't seen there being a big burst higher that drives the momentum that tracks many traders to come piling it back into this trade. And it doesn't mean it won't happen. But right now, at this point, uranium is just quietly moving higher. And the question is, is that does that trigger some new bull run? Well, if the market stays relatively stable, and the AI trade continues to be a focal point, there's lots of room for uranium to potentially catch a bit here and run a little bit as we move in towards May. Patrick, before we wrap up this week's podcast, let's hit that 10-year Treasury note chart. The correlation to crude oil continues as pressure on the upside of crude occurs than pushing yields higher. So it will we see a crude oil breakout. And if we do, does that push yields towards 440, 450 on the upside is going to be the key to watch? Overall, I think we're heading in the second half of the year to lower rates, like Luke Groman was suggesting. But on the short term, this correlation to oil is so evident. And we'll see whether or not any bullish impulse here on the short term of crude results in higher yields on the short term. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of big picture trading. The details are on the last pages of the slide deck, or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's research roundup. Well, in this week's research roundup, you will find the transcript for today's interview and the trade of the week chart book that we discussed here in the post game, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's research roundup. So that does it for this week's episode. We appreciate all the feedback and support we get from our listeners. And we're always looking for suggestions on how we can make the program even better. For those of our listeners that write or blog about the markets, and would like to share that content with our listeners, send us an email at [email protected]. and we will consider it for our weekly distributions. If you have not already follow our main account on X at macro voices for all the most recent updates and releases. You can also follow Eric on X at Eric S. Townsend. That's Eric spelled with a K. You can also follow me at Patrick Sarresna on behalf of Eric Townsend myself. Thank you for listening and we'll see you all next week. That concludes this edition of macro voices. 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