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The CL Crude-analysis Thread
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The CL Crude-analysis Thread

  #1311 (permalink)
Market Wizard
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Still has to get passed in the Senate and not be vetoed by the President who I believe has indicated he will veto it.

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  #1312 (permalink)
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Quoting 
(Reuters) - An earthquake with a magnitude of 4.5 hit near the north-central Oklahoma city of Cushing on Saturday afternoon, the U.S. Geological Survey said.

The quake was shallow, at a depth of about 1 km (0.6 miles), with its epicenter at 5 km (3 miles) from Cushing, it said. There were no immediate reports of injuries or damage.

It was the second significant quake to hit the state in a day, the USGS said, adding a quake with a 4.4 magnitude hit near Medford, about1 130 km (80 miles) northwest of Cushing, on Saturday morning.

.

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  #1313 (permalink)
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I've read recently that a "huge" amount of oil has been discovered in Israel

Has anybody read/ seen this?

Supposedly it is in the Golan Heights which would then bring the argument, whose land is it?

-William

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US Crude Oil stocks head back towards all-time highs as refinery maintenance ramps up. Must say I'm a little surprised about the shape of the WTI curve given the inventory situation. Would have expected to see a lot steeper contango. Even more interesting is that Nov/Dec is trading -45 while Dec/Jan is trading -80 but I suppose as long as there is any empty space and economics support storage, you should fill storage.

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WilleeMac View Post
whose land is it?

Palestinians, LOL

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SMCJB View Post
US Crude Oil stocks head back towards all-time highs as refinery maintenance ramps up. Must say I'm a little surprised about the shape of the WTI curve given the inventory situation. Would have expected to see a lot steeper contango. Even more interesting is that Nov/Dec is trading -45 while Dec/Jan is trading -80 but I suppose as long as there is any empty space and economics support storage, you should fill storage.

I am not sure this will be a sustained move. Crude still looks weak.

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SMCJB View Post
US Crude Oil stocks head back towards all-time highs as refinery maintenance ramps up. Must say I'm a little surprised about the shape of the WTI curve given the inventory situation. Would have expected to see a lot steeper contango. Even more interesting is that Nov/Dec is trading -45 while Dec/Jan is trading -80 but I suppose as long as there is any empty space and economics support storage, you should fill storage.

The Jan16-Dec16 spread usually starts getting wider about now. It started widening last week.

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  #1318 (permalink)
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@SMCJB

Needing your opinion.

What months would you look to if you are non-spec player for hedging (?) Meaning, what months could be of more interest than others?

Or if you are a spec player would you also consider these?

For example. Today the DEC15 contract starts, would MAR, JUN, SEP, DEC of 2016 settlement prices be of interest?

Any thing else you would like to add is more then welcome

Thank you

-William

EDIT

Sorry about that - anybody is welcome to chime in

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  #1319 (permalink)
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I'm not sure I understand the question.

Oil Producers generally hedge their positions with what are referred to as "Calendar Month Average" Swaps. These swaps settle against the 'Calendar Month Average' of the 'Prompt Month Futures Contract'. So if I'm a producer I might sell 100kb/month of the Cal 2016 Swap, meaning I sell 100kb for each month in 2016. In Jan 2016, these swaps start settling against the prompt month contract. If you think about in Jan16 the prompt month will be Feb16 at the beginning of the month and Mar16 at the end of the month. Hence the approximate value of the Jan16 Cal Swap = 2/3rds Feb16 Futures + 1/3rd Mar16 Futures. It also follows that the approximate value of the Cal 2016 Swap is 2/36ths Feb16 Futures + 1/12th Mar16 Futures + 1/12th Apr16 ... +1/12 Jan17 +1/36 Feb17 Futures.

Anyway if I'm a bank or swap dealer, when I buy these Cal swaps from producers, I hedge them with futures. So if I buy a Cal 2017 swap, I will sell Dec16 and Dec17 futures against it. That leaves me long Feb17-Feb18 from the swap but short Z16 and Z17 against it. As liquidity allows I will then buy the Dec16-Jun16-Dec17 Butterfly, rolling some of my Dec16 and Dec17 shorts into Jun17, which better hedges my risk. The same then follows with the Dec16-Mar17-Jun17 and the Jun17-Sep17-Dec17 butterflies.

This is why if you pull up a CL futures chain the highest volumes and open interest (outside of the prompt months) are all the December contracts, followed by the June contracts, followed by March, followed by Sep etc etc.

The Globex implied engine is also heavily influenced by this market structure. I believe that the implication engine will currently calculate implieds for a) the prompt 12 contract months plus b) the next Jun contract month not in the prompt 12 and c) the next 2 Dec contracts month not in the prompt 12. Hence today I believe implication works for Nov15-Oct16, Dec16, Jun17, Dec17.

While CME implication may be switched off for other months, the market makers/HFT/Prop Shops etc will "imply" the other months for you (at a small price :-) ). As an example, you could pull up the Dec16 contract, the Dec16/Dec17, Dec17/Dec18 and Dec18/Dec19 spreads and calculate where Dec19 should be. The market on CME will probably be a lot wider, but if you improve the market, somebody will immediately jump in front of you. You can keep improving the market and somebody will always jump in front of you until you reach a price equal to Dec16 + Dec16/Dec17 + Dec17/Dec18 + Dec18/Dec19 - 1 tick at which point there is no longer an arbitrage and whoever the market makers/HFT/Prop Shop is will no longer improve your order.

Sorry @WilleeMac I know this doesn't answer your question but if you try and elaborate I will try and give you a better answer.

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SMCJB View Post
The market on CME will probably be a lot wider, but if you improve the market, somebody will immediately jump in front of you. You can keep improving the market and somebody will always jump in front of you until you reach a price equal to Dec16 + Dec16/Dec17 + Dec17/Dec18 + Dec18/Dec19 - 1 tick at which point there is no longer an arbitrage and whoever the market makers/HFT/Prop Shop is will no longer improve your order.

Can you use this to game them into improving your fill? For example, place an improved limit on the Offer - they jump ahead of you again - you rinse and repeat until the point in which you pull your Offer and lift theirs?

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