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The CL Crude-analysis Thread
Started:December 17th, 2014 (02:33 PM) by tturner86 Views / Replies:125,276 / 1,753
Last Reply:22 Hours Ago (02:57 PM) Attachments:450

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The CL Crude-analysis Thread

Old January 12th, 2015, 09:53 AM   #41 (permalink)
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It will be interesting to see how this plays out

46.50

0830 - 40amET today

-Bill

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Last edited by WilleeMac; January 12th, 2015 at 09:55 AM. Reason: add time stamp
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Old January 12th, 2015, 11:28 AM   #42 (permalink)
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I really didn't expect crude to do such a nice slide down ... I actually like it because then it has a nice space back up for trading .... lots of opportunities now and then but still volatility remains more important for me than actual price. It's just a number. So let it go to 10 dollars. Drivers and airliners will be happy at least

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Old January 12th, 2015, 01:02 PM   #43 (permalink)
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WoodMackenzie: Analysis of 2,222 oil fields suggests if Brent falls to $40 a barrel 1.6% of global oil supply could be cash negative

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Old January 12th, 2015, 01:04 PM   #44 (permalink)
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Yes sir

For now today, the week(?), month(?) 46 clams seems to be the agreed upon price. However GS came out today and slashed forecast on this, that and the other.


Quoting 
Analysts at Goldman Sachs cut their three-month forecasts for Brent to $42 a barrel from $80 and for the U.S. West Texas Intermediate contract to $41 from $70 a barrel. The bank cut its 2015 Brent forecast to $50.40 a barrel from $83.75 and U.S. crude to $47.15 a barrel from $73.75.

Oil prices extend falls; Goldman Sachs slashes forecasts - BNN News

And we can't forget the argument over what shale oil needs in order to cover junk bond debt - I've heard figures as high as 120 bucks/ barrel.

I dunno, I just trade what I see - flat at the end of each day (and the sooner the better.)

-Bill

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Old January 14th, 2015, 05:49 PM   #45 (permalink)
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Thoughts on Low Oil

Futures Edge on FIO
Hello,

I was thinking about Mike's poll and noticed the shift from being a majority vote for $70, swinging to $30 as we experienced a large fall that same/following day. To me, $30 is unrealistic and $20 is just insane, here's why:

Say we have a futures account with $25,000.00 loaded up. If oil were to reach $20 per barrel, we could literally just buy 1 contract of oil and hold it indefinitely and never get liquidated on the position. If it rose to $40 per barrel (extremely probable) you would have doubled your money. $60 and you've tripled your investment.

Even at $30 per barrel you could buy and hold. Sure price could go to $5 but then simply add another $5k margin to your account for a few weeks.

The cyclical nature of Oil is nothing new, supply and demand have always lagged behind one another at different stages. Yes, we may see low oil prices for a considerable time but prices cannot stay low forever and eventually they should rise once again, perhaps not to $100+ but experts agree that the $60-$80 range would be considered 'fair value'.

Now there is of course one big issue with this, and that is expiration. However looking at the Open Interest for CL, we can see that DEC15 actually has more open interest than any other month except for the current (MAR15) and already has a significant amount of volume traded for it's length. Having said that, the spreads between MAR and DEC are about $6, however the spread for rollover is normally around $0.50, so it could be more profitable to manually roll each position toward expiry (9 * $0.50 = $4.50) or if there is a convergence in price at some stage throughout the month.

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This is all just speculative in nature and we would have to see how forward months reacted if price reached as low as $20-30, perhaps they wouldn't follow so keenly, but in my opinion it could be something to consider.

Let me know your thoughts, whether you think I'm a lunatic or there's a simple flaw in my ideology.

Cheers,

Awls

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Old January 14th, 2015, 06:05 PM   #46 (permalink)
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CobblersAwls View Post
Say we have a futures account with $25,000.00 loaded up. If oil were to reach $20 per barrel, we could literally just buy 1 contract of oil and hold it indefinitely and never get liquidated on the position. If it rose to $40 per barrel (extremely probable) you would have doubled your money. $60 and you've tripled your investment.

This has never and will never drive price.

Oil is being squeezed and pulled by the largest players at the moment. Either $70 or $30 may seem unlikely, but are not out of the picture. A lot of people are calling for $30, the more that jump on the bandwagon the less likely I believe will get there.

But just because it doesn't get to $30 doesn't mean that $70 is in the picture either. I can easily range in the $40-$50 range until a player decides what they are doing.

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Old January 14th, 2015, 06:08 PM   #47 (permalink)
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CobblersAwls View Post
Say we have a futures account with $25,000.00 loaded up. If oil were to reach $20 per barrel, we could literally just buy 1 contract of oil and hold it indefinitely and never get liquidated on the position. If it rose to $40 per barrel (extremely probable) you would have doubled your money. $60 and you've tripled your investment.

I'm not sure I understand your logic? What does how much money have in your account have to do with where the price is going to go?

CobblersAwls View Post
The cyclical nature of Oil is nothing new, supply and demand have always lagged behind one another at different stages.

Agree.

CobblersAwls View Post
Yes, we may see low oil prices for a considerable time but prices cannot stay low forever

Why not? They stayed a lot lot lower than this for decades.

CobblersAwls View Post
Now there is of course one big issue with this, and that is expiration. However looking at the Open Interest for CL, we can see that DEC15 actually has more open interest than any other month except for the current (MAR15) and already has a significant amount of volume traded for it's length. Having said that, the spreads between MAR and DEC are about $6, however the spread for rollover is normally around $0.50, so it could be more profitable to manually roll each position toward expiry (9 * $0.50 = $4.50) or if there is a convergence in price at some stage throughout the month.

Feb, Mar, Apr & Jun all have higher OI than Dec, but even so I'm not sure what the relevance of that is. I assume you know why Dec has such a high OI? If you page forward on Bloomberg and look at Z7, Z8, Z9, Z0 etc I think you will see why.

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Old January 14th, 2015, 06:31 PM   #48 (permalink)
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SMCJB View Post
I'm not sure I understand your logic? What does how much money have in your account have to do with where the price is going to go?

Sorry, I should have made it clearer, but with a 1 lot trade, each $1 move in CL is equivalent to $1,000. Therefore with a $20,000 account you could buy 1 lot CL at $20 and 'technically' hold it indefinitely.


SMCJB View Post
Why not? They stayed a lot lot lower than this for decades.

Here is where I would say things get more complicated and difference of opinion will surface. I think that we could have low Oil prices for a while ($50 region) but at $20 only OPEC producers will be left, and even they will be struggling to scratch. Arthur Berman wrote an interesting piece recently about the true cost of extracting in certain shale regions, stating that for most they need $80+ to cover costs and recent surveys stating they can survive sub $60 are skewed, only including costs for extraction and not operational and staffing costs. Once we see the weak links shaken out I think we'll see OPEC cut production until price rises to a more sustainable rate.

The point was that at $20 per barrel, I think an investment of $20,000 could see a good ROI.


SMCJB View Post
Feb, Mar, Apr & Jun all have higher OI than Dec, but even so I'm not sure what the relevance of that is. I assume you know why Dec has such a high OI? If you page forward on Bloomberg and look at Z7, Z8, Z9, Z0 etc I think you will see why.

FEB, APR and JUN have lower OI from looking at the chart posted. DEC has 192k, whereas FEB has 158k (also expiring soon), APR has 115k and JUN 144k.

As for the correlation with DEC Oil and Eurodollars, I don't quite get the correlation, are you referring to the transfer of petrodollars? Please explain as I'm always looking to learn.

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Old January 14th, 2015, 06:35 PM   #49 (permalink)
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This has never and will never drive price.

Oil is being squeezed and pulled by the largest players at the moment. Either $70 or $30 may seem unlikely, but are not out of the picture. A lot of people are calling for $30, the more that jump on the bandwagon the less likely I believe will get there.

But just because it doesn't get to $30 doesn't mean that $70 is in the picture either. I can easily range in the $40-$50 range until a player decides what they are doing.

Hi tt86,

I didn't mean to imply that it needs to actually hit $30 or $70, I just used the poll as a reference to what got me thinking about this topic. You are right, we could hover around $40 for a long time, I just wanted to suggest that, at $20 per barrel, one could technically hold a 1 lot trade indefinitely with a reasonably low investment.

Of course there are restrictions such as the rollovers I mentioned, but what others can you think of?

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Old January 14th, 2015, 07:02 PM   #50 (permalink)
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CobblersAwls View Post
Hi tt86,

I didn't mean to imply that it needs to actually hit $30 or $70, I just used the poll as a reference to what got me thinking about this topic. You are right, we could hover around $40 for a long time, I just wanted to suggest that, at $20 per barrel, one could technically hold a 1 lot trade indefinitely with a reasonably low investment.

Of course there are restrictions such as the rollovers I mentioned, but what others can you think of?

The average retail trader wouldn't be able to stomach the big ups and downs and odds are would sell at the worst time only to watch it whip back in their fav tenfold.

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