20180606-法国巴黎银行-Energy___MarFATM_Monthly__Convergence_to_fair_value_11页_633kb

COMMODITY QUANT STRATEGY SUMMARY

Core Content

This document provides an analysis of energy commodity markets from the perspective of MarFA™ Monthly and Factor model by BNP Paribas Brasil S.A.'s Commodity Quant Strategy team. It outlines the current market dynamics, key drivers of energy prices, and the performance of the models used for pricing and trading decisions.

Main Views and Key Information

Market Dynamics

• The energy markets have moved from an overreaction to a convergence to short-term fair value.
• MarFA™ took profit on a short WTI crude oil position with a 5% gain.
• MarFA™ has been short WTI and Brent since mid-April, while the BNPP-TIF model (trend following approach) is in the opposite position.
• The first market component explains a large portion of the variation in energy prices, with explanatory power dropping significantly for the second component over the past 35 weeks, indicating that geopolitical tensions have become more relevant than previously identified factors.

Weekly Analysis (MarFA™ Weekly)

• PCA methodology is used to determine market factors and monitor short-term mispricing.
• The first market component has shown the highest co-variance with:
  • Inventories (in days of demand)
  • US money market conditions (cost of US dollar funding)
  • The shape of the global and US interest rate curves
• The second market component had lower explanatory power and was not as relevant for energy prices, with the exception of global crude ADU outage and financial conditions, but these factors had minimal impact.
• The explanatory power of the second component dropped considerably, suggesting that other events (e.g., geopolitical tensions) are now more influential.

Daily Analysis (MarFA™ Daily)

• The first principal component continues to explain the majority of daily price variations for energy commodities, with the second component gaining more relevance for WTI crude oil.
• The highest co-variance for the first component includes:
  • Global and Opec storage levels
  • US money market conditions
  • Interest rate curves
• The second component has shown some relevance for global crude ADU outage and financial conditions, but its statistical power remains low.
• The explanatory power of the first component remains above 95% for most energy assets, except for WTI crude oil.

Strategy Insights

• The MarFA™ model has developed a function to estimate the weekly fair value of WTI and Brent crude oil based on the most significant drivers.
• The model suggests that WTI is no longer cheap to its short-term fair value, with estimated prices of USD 72.3/bbl for Brent and USD 66.0/bbl for WTI.
• The Factor model remains short Brent and WTI, with values USD 62.12/bbl and USD 59.74/bbl, respectively, 19.1% and 8.3% below current market levels.

Contacts

• Gabriel Gersztein – Commodity Quant Strategy, Sao Paulo, +551138413421
• Samuel Castro – Commodity Quant Strategy, Sao Paulo, +551138413492
• Luca Maia – Commodity Quant Strategy, Sao Paulo, +551138413447

Legal and Disclaimer Information

• The document is non-independent research and may be subject to conflicts of interest due to interactions with sales and trading.
• It is a marketing communication and not investment research for MiFID II purposes.
• Research content is only available to those who have signed up for BNPP Global Markets Research packages or are out of scope of MiFID II unbundling rules.
• The indicative prices are not actual transaction terms and are based on internal models and assumptions.
• No liability is accepted for any losses arising from the use of this document.
• The performance data may be based on back-testing and does not reflect actual results or future performance.
• Options and ETFs discussed are complex instruments and may involve high risk; investors should consider investment objectives, risks, and fees before making any decisions.

Key Takeaways

• MarFA™ and Factor model are used to analyze energy prices and identify fair value.
• Geopolitical tensions have increasingly influenced oil prices, reducing the relevance of traditional macroeconomic factors.
• Explanatory power of the first market component remains high, while the second has diminished.
• Indicative fair values are provided for WTI and Brent crude oil, suggesting they are currently overvalued relative to the model's estimates.
• Legal disclaimers emphasize that the document is for informational purposes and not an investment recommendation.