CL Redux

The time article assessment of what is coming out of Libya next 1-2 weeks seems supporting this crystal ball said trading range :D


Quote from schizo:

My broken crystal ball sez that we'll chop around between 92 and 100 for the next 1-2 weeks. So turn off that damn news and just buy the dip and sell the rip. :D
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Good quote

“The way I see it is simple: if the market goes up without you, you are wrong; if you go down with the market, you are wrong. End of story. I have no convictions. I only have a plan: deploy, reweight and defend the money. My market opinion is the same as J.P. Morgan’s, “It will fluctuate.” My job is to make money from the fluctuations.” – Teresa Lo
 
Quote from Swan Noir:

The fascinating thing about oil is that it is not actually a global market but splintered into some local markets with anomalies such as "the Cushing Syndrome" (not Cushing's disease)
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More like the Cushing urban myth. They want you believe that so that you rolled your financial longs at their exorbitant 40% annualized markups. Those with the permission to play in the last hour of trading in the CL March contract made 3 points (40% annualized) on the "Cushing syndrome" myth meeting reality, when the March-April calendar spread shrunk from 4 to 1 point in a matter of minutes, as they scooped up the front month at 91 and sold it an hour later 3 points higher, with their next-month hedge barely moving...

Interestingly, the manipulators, who must have been prepared to take delivery in the front month contract, were not inclined to get their hands dirty for the miserly 3 point (40% p.a.) of arbitrage profit (gross), even if waiting for that delivery would have allowed them to cover their tracks completely (from the electronic markets participants they bluffed so perfectly) with the enormous $4 contanto carried past the last trading moment, perpetuating the Cushing myth a bit longer...

03042011clcalendarlastt.png
 
Quote from McBet:

when the March-April calendar spread shrunk from 4 to 1 point in a matter of minutes, as they scooped up the front month at 91 and sold it an hour later 3 points higher, with their next-month hedge barely moving...
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Notice also in that chart from Feb 22 that it was possible to leg out of the front month and leg in into the next month at the same price of 94!

So if you were prepared to take some directional risk for half an hour, you (The Market Maker, Commercial, Bank Arbitrage Desk, etc) would be able to effectively reduce your roll yield to zero, offloading your March inventory at the same price for which you bought the new April contract half an hour earlier. And what was that Cushing syndrome again? I can't see any for the Last Hour traders... Zero roll yield... a holy grail in case of CL. Or... a day like any other in Brent (currently even in backwardation... again) See you there!
 
The problems at Cushing are real ... not a myth. But, like any other storage/processing problem it facilitates manipulation. Classic manipulative thinking calls for identifying a real bottleneck and then coming up with strategies that exploit that reality.


Quote from McBet:

More like the Cushing urban myth.

03042011clcalendarlastt.png
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Quote from Swan Noir:

Classic manipulative thinking calls for identifying a real bottleneck and then coming up with strategies that exploit that reality.
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Why then is NYMEX watching all that manipulation happening before their very eyes (with Saudi's defecting long ago to a fairly priced benchmark) and why don't they simply make all WTI-based contracts (QM alone is not enough, because it is hedged with CL) immune to this sort of last minute manipulation, by eliminating the Last Hour Monopoly? It can be achieved so simply... by making CL into a cash-settled contract like Brent is (http://www.elitetrader.com/vb/showthread.php?s=&postid=3101029#post3101029 )
 
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