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

  #1871 (permalink)
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SMCJB View Post
Not sure what the relevance of this is (if any!), but the 10 Day Average True Ranges of both RB and HO are at multi year lows!

What does RB and HO stand for ?

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  #1872 (permalink)
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SMCJB View Post
Not sure what the relevance of this is (if any!), but the 10 Day Average True Ranges of both RB and HO are at multi year lows!

So I ran the actual numbers.
For HO its the lowest 10 day ATR since 7/6/15 and for RB the lowest since 7/11/14.


FrazMann View Post
What does RB and HO stand for ?

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RB is the NYMEX RBOB or "Reformulated Gasoline Blendstock for Oxygen Blending" contract. While technically not finished Gasoline, this is considered the Gasoline futures contract. (It replaced HU which was a gasoline future).
HO is the NYMEX Heating Oil Future.
Both are 42000 Gallon contracts priced in $/Gal, which since there are 42 Gallons in a Barrel means they are 1000 bbl, same as CL.

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  #1873 (permalink)
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Forbes‏Verified account @Forbes 5m5 minutes ago
How technology breakthroughs drove peak oil far into the future:
http://on.forbes.com/60108XQoI

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  #1874 (permalink)
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tturner86 View Post
Forbes‏Verified account @Forbes 5m5 minutes ago
How technology breakthroughs drove peak oil far into the future:
http://on.forbes.com/60108XQoI

Funny how that picture looks so dissonant compared to the text just underneath it
We used to think about Peak Oil like this – the reserves are finite, we know where they are and how long they will last, and we will start running out soon. But with recent technological innovations, we keep finding new oil deposits that are now recoverable and a peak may not happen for a century or more.

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  #1875 (permalink)
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xplorer View Post
Funny how that picture looks so dissonant compared to the text just underneath it
We used to think about Peak Oil like this – the reserves are finite, we know where they are and how long they will last, and we will start running out soon. But with recent technological innovations, we keep finding new oil deposits that are now recoverable and a peak may not happen for a century or more.

After a storm in the gulf they stopped production for the storm. When they came back there was more oil then originally found. I need to find the article but it was one of the first signs that their knowledge of what was available was off.

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  #1876 (permalink)
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Backwardation vs Contango

I read an interesting piece by John Kemp yesterday ( Goldman takes on the Brent spreads: Kemp | Reuters ) in which he discussed the current shape of the Brent futures curve. Goldman's view is expressed, in which they believe backwardation is likely to return, suggesting that the June/Dec 17 spread will become positive once again:


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We are in a sort of no-mans land in my opinion - based off of the spread chart show above and the fundamentals I'm focused on. I have a few areas of focus of my own which are not mentioned:

a) Cushing OK storage is reaching close to max capacity. It's my understanding that the maximum limit is 77m bbls (someone confirm if I'm correct or totally off the mark here) and we are currently at around 67m bbls:


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b) US shale doesn't seem to be slowing down and there has been a lot of hedging activity out in the curve which has seen the mid curve of 2018 remain depressed:


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Having said this it is believed that baseline costs have risen for many shale players due to increased financing costs due to lower oil, and I wonder how recent and perceived continuing rate hikes will continue to increase the pressure on some shale plays. S.A's FX reserves are often mentioned but it's been a while since I've seen these points raised.


Finally - as an aside - ( @SMCJB perhaps you could help me with this ) I was wondering why JK used the June/Dec 17 spread as a proxy to illustrate the contango/backwardation of the market. When would you move to Dec/June 18 for example? Are there any other common spreads used to gauge the market?

I welcome any comments/thoughts/arguments on the fundamentals of the markets (refinery maintenance, seasonals etc) and views on spreads in general.

Many thanks,

CA.

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  #1877 (permalink)
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Just some additional charts in relation to my last query on spreads.

Comparing M7/Z7 to Z7/M8 gives quite different results with M7/Z7 still in contango but Z7/M8 in backwardation and re-iterates my confusion as to why JK used this particular 6m spread in his example and at which point would you use one over another.

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  #1878 (permalink)
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CobblersAwls View Post
I read an interesting piece by John Kemp yesterday ( Goldman takes on the Brent spreads: Kemp | Reuters ) in which he discussed the current shape of the Brent futures curve. Goldman's view is expressed, in which they believe backwardation is likely to return, suggesting that the June/Dec 17 spread will become positive once again:


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I like Kemp's analysis. I think it's as good a free resource as there is out there. Remember there is Goldman and then there is J.Aron. When Goldman says "XYZ" that is their official reserach department and could be completely different to what J.Aron think and are doing. (For those that don't know J.Aron is the commodity trading arm of Goldman, and were (are?) a gaint in the commodities markets.)

CobblersAwls View Post
We are in a sort of no-mans land in my opinion - based off of the spread chart show above and the fundamentals I'm focused on. I have a few areas of focus of my own which are not mentioned:

a) Cushing OK storage is reaching close to max capacity. It's my understanding that the maximum limit is 77m bbls (someone confirm if I'm correct or totally off the mark here) and we are currently at around 67m bbls:


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b) US shale doesn't seem to be slowing down and there has been a lot of hedging activity out in the curve which has seen the mid curve of 2018 remain depressed:


Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



Having said this it is believed that baseline costs have risen for many shale players due to increased financing costs due to lower oil, and I wonder how recent and perceived continuing rate hikes will continue to increase the pressure on some shale plays. S.A's FX reserves are often mentioned but it's been a while since I've seen these points raised.

There seems to be an increasing belief in the market that OPEC's current strategy IS having an effect, and that worldwide oil in storage is declining. As such the few people I talk to, are actually more bullish than I have seen them in many months. This is interesting as it contradicts hedge fund open interest, which has actually reduced the size of it's bullish positions. The fundamentals for the US appear to be very different though. Stocks are extremely high and production is increasing. As such if things continue as they are this looks rather bearish to me for WTI which is a land locked crude. Of course the two big variables that could change that are a) reduced imports (which we are NOT seeing) and b) increased exports (which we are seeing). I suppose increased refinery runs could also effect this, but I'm really not sure how much extra capacity there is. Summing up if OPEC continues with their reduced production I see a Bullish case for Brent but a bearish case for WTI.


CobblersAwls View Post
Finally - as an aside - ( @SMCJB perhaps you could help me with this ) I was wondering why JK used the June/Dec 17 spread as a proxy to illustrate the contango/backwardation of the market. When would you move to Dec/June 18 for example? Are there any other common spreads used to gauge the market?

I welcome any comments/thoughts/arguments on the fundamentals of the markets (refinery maintenance, seasonals etc) and views on spreads in general.

Many thanks,CA.

As you know the 6 month and 12 month spreads (Jun-Dec-Jun and Dec-Dec) are the most popular longer dated spreads in Crude. As such I suspect the emphasis on the Jun17/Dec17 spread is purely that it's the most prompt, and hence most liquid of the 6 month spreads, and not chosen because it represents some specific fundamental phenomenon. If you follow all of Kemp's analysis he has been talking a lot about the Jun17/Jun18 spread in Natural Gas. I don't know anybody who actively trades that spread and believe he is just using it to illustrate a point. (In reality people would trade Oct-Apr).

Note this isn't the first time we've seen this M shaped curve in recent history. Just 4 months ago we had a very similar shaped curve, just $4 higher. Interestingly between these two curves we had the curve in January with much lower prices in the front, but even higher prices in the back! (I did pick dates that highlight the extremes.)

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  #1879 (permalink)
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CobblersAwls View Post
Just some additional charts in relation to my last query on spreads.

Comparing M7/Z7 to Z7/M8 gives quite different results with M7/Z7 still in contango but Z7/M8 in backwardation and re-iterates my confusion as to why JK used this particular 6m spread in his example and at which point would you use one over another.

Yes it portrays a very different picture...

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And just to show this is non-fixed price dependent

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  #1880 (permalink)
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Thanks to @SMCJB for all this spread info.

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Last edited by jokertrader; April 9th, 2017 at 04:59 PM.
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