Commentary provided by Brent Belote of Cayler Capital
Cayler Capital had a slight pullback after our blockbuster performance in March, posting -5.53% for April (Past Performance not indicative of future results). Primary losses were from long oil positions. We have gone back to the sideline for the time being on oil directionally but still believe we test the highs before the year is done.
News flash for anyone who hasn’t filled up their gas tank in a few months; we are globally in a massive product shortage. Gasoline and Heating Oil are near their all-time highs, even after a $20 pullback in oil prices. Sunday night, gasoline broke the $4/gallon time NYMEX Price (Yes, I know you pay more at your local pump, but that is the result of transportation, greedy taxes from politicians, and markup by the station). The product shortage is a real problem, and I can’t even begin to think how in trouble the world would be if China was fully open. We see extreme distillate shortages all over the Eastern Seaboard, with some gas stations fully running out of diesel. We remain long both product cracks as this shortage we expect will worsen before it gets better.
I was asked a great question in a capital raising meeting the other day that lit a fire under me, and I wanted to share it here: What do you see as the future of oil trading in a world where ESG is being pushed?
I want to be crystal clear: ESG policies are the best thing to happen to oil trading and Cayler Capital in the last 30 years.
As politicians try to put oil producers and combustion engines out of business through ESG policies and taxes, they seem to ignore that the profitability time for most oil projects or refineries ranges from 18 months to 10 years. Additionally, many oil projects are not being maintained because of the uncertain future, so we have a natural decline rate increasing exponentially. The timeline differential between profitability / ESG Policies / Oil Demand is primarily why we are not seeing massive increases/investments. No one is willing to invest in these long-term projects when the uncertainty of the entire industry is in doubt. This creates unprecedented volatility that will continue for the foreseeable future as supply becomes constrained. Yet, demand continues to grow (We have not hit peak oil demand yet, which likely won’t occur for another 5-10 years). They are phasing out oil but forget that the transition will not be all at once. This is the golden age of oil trading, and I think it has 20 more years of glory before it is time to ride off into the sunset.
Past performance is not necessarily indicative of future results.