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itscalledcommonsense

itscalledcommonsense
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  • There Will Be No Oil Storage Crisis In 2015 [View article]
    Can't trade VIX directly, only VIX futures or derivatives of the futures.
    Mar 29, 2015. 01:34 PM | Likes Like |Link to Comment
  • Magnum Hunter's Shrinking Asset Base And The Implications For Shareholders [View article]
    I used to be in the same office building as these guys and got to know some of them well. Let me say that "conservative" and "shareholder friendly" are not adjectives I would use with them...
    Mar 27, 2015. 05:24 PM | 6 Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    Speaking of price...wow!

    jeezuz,

    The advantages of trading futures themselves are so large that I have not looked at implementing with ETPs.

    In volatility it would be easy, although not precise: sell VXX, buy VXZ. (Lots of people seem to be doing this type of trade in volatility, BTW.)

    I am not super familiar with all of the oil ETPs so I cannot really answer, maybe Force Majeure knows.
    Mar 27, 2015. 03:23 PM | Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    With my implementation I don't care where price goes. I only care about contango increasing or decreasing.

    Specifics: I put on the June/July spread at 0.80. it is now 1.35. I recently rolled out of my spreads in the April/Jul into the May/Jul by selling the April/May for 2.10. The June/July could easily make 2.10 before all is said and done. If we have repeat of 2009, you are looking at 9.00. Probably not going to get that due to the pipeline capacity, but one can hope!

    If we have war or some announcement on OPEC reducing production then I get out at no worse than 0.00, when I put on the trade, probably in the 0.50 range now. But the chance of this happening are in the minority before the June OPEC meeting.

    And if that happens guess what? I just reverse it! I am not an ideologue, I am not in love with the idea of low oil prices. I just trying to make money. I can make money on the move to backwardation just as easily as the contango extension.
    Mar 27, 2015. 01:25 PM | 1 Like Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    I don't know. Obviously there is fear or else we wouldn't have this contango. In 2009 1m/2m timespread was at $9, so we aren't even close to that level of fear.

    I think everyone realizes that the market is only 1-2mmbpd out of balance and one announcement from OPEC/Saudi/Russia and the whole glut would be over so why risk being short the front months? The guys with storage leased can actually make risk free money, so why not just do that?

    But being long a constant maturity ETF waiting for the storage to not fill in the face of bad news and increasing contango is not my idea of the trade to make. Better trade as I have stated before is to be short the near months long the far months and then reverse once the trend/news goes against you. You can skin the cat twice and with almost no margin.
    Mar 27, 2015. 12:34 PM | Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    FM,

    Genscape yesterday reported Cushing was @ 60mmb filled and filling at 2-2.5mmbpw. So, that gives 4-5 weeks til operational capacity limit. Contango is increasing, providing even more incentive to play contango for anyone with leases at Cushing. (And they know that if they send barrels to Cushing they will make more on all the barrels they have there as contango increases and market reacts to Cushing storage fill and they roll the hedges.) Refineries are not going to be at 95% within 5 weeks. We are not going to reduce production by enough to balance the market in 5 weeks. We aren't going to turn around any of the VLCC on the way here.

    The builds have been remarkably monotonous and seem set to remain so in the near term. So, the shell capacity thesis is going to get a major test. I for one, would not like to be long near term CL (or ETPs tracking it) when that test is happening. Do you actually plan on holding the USO if the Cushing builds maintain over 2mmbpw for the next couple of weeks?
    Mar 27, 2015. 10:46 AM | 1 Like Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    And contango really increasing today. Contango increases when price goes up and contango increases when price goes down. I interpret the action as saying the big boys still see near term glut as on the table. But of course that matches my book, so I am biased.
    Mar 27, 2015. 10:23 AM | Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    I don't know. But there has been a ton of it in the energy patch. Once the easy money is gone we will find out more. When I made my comment I was thinking more along the lines all the crazy dot-coms and CDOs. But these are not on the order of $7T.

    I deal with the Chinese a lot and I can tell you that their economy is in a world of hurt due to overcapacity and waste. They will be the poster child for malinvestment for decades to come. They are in a bind of epic proportions.
    Mar 27, 2015. 10:14 AM | 2 Likes Like |Link to Comment
  • Oil Will Bottom In 3 Weeks: A Comprehensive Analysis Of Domestic Oil Production [View article]
    avolossov :

    We are the swing producer now. That was made obvious after last OPEC meeting. So, our production actually is a very important factor in the price.
    Mar 27, 2015. 09:59 AM | 1 Like Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    That was interesting article:

    "Chinese government researchers estimate that there was nearly $6.8 trillion worth of “ineffective investment” in China between 2009 and 2013, which has resulted in massive overcapacity in many Chinese industries."

    Man, the Chinese really know how to do it up right. They make our failures look so pale by comparison.
    Mar 27, 2015. 09:23 AM | 1 Like Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    "Look no further than iron ore and cement price collapse"

    And copper...and coal...and silver...and on and on. The end of Chinese make-work killed the commodities supercycle.
    Mar 27, 2015. 09:16 AM | 2 Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    FM, to me the most interesting feature of yesterday's action was the curve maintaining it's shape. If near term supply disruption was really the main fear then contango should decrease. It didn't.
    Mar 27, 2015. 08:22 AM | Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    There is a lot of backfitting and unknowns in your model, but I think it will be close for this year. Seems within reason, for sure. There just aren't many incentives for the E&P companies to stop producing.

    Most have huge debts. Almost all of the shale companies were FCF negative at $100 oil. They are going to be LOL FCF negative this year barring a war. Their hedges are rolling over at much lower prices. Bank borrowing base reassessments are a month away.The debt rolls are upcoming. The equity offering window could close at any moment.

    So, they need all the cash they can get. If a well can cash flow positive after selling forward and paying all of the variable costs it will get drilled and completed.
    Mar 26, 2015. 04:59 PM | 2 Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    They are building. See one of Douglas Ryan's 10 articles on the subject.
    Mar 26, 2015. 11:48 AM | Likes Like |Link to Comment
  • There Will Be No Oil Storage Crisis In 2015 [View article]
    "Oil is priced based upon the supply and demand of the commodity as a trading vehicle. It is not priced based upon supply and demand by end-users."

    I always thought speculators were providing liquidity to the producers. Seeing that speculators are almost always net long and producers almost always net short seems to confirm that framework..
    Mar 26, 2015. 11:47 AM | 2 Likes Like |Link to Comment
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