Cost of carry in CL

G

greg25

Hi All,

Does the market care about the cost of carry in Cl or Wti ?

If yes, what the cost is?

I am looking at it for grains but i never use it for energy.

Thanks

Greg
 
Ok thanks

What i find is from $0.30 to $1.40 monthly per barrel depends on location, tanker or pipeline, cavern, tank, ship.

That makes a bit sense.

Greg

Thanks for making me think a bit.. jajajja
 
greg25 said:
Ok thanks

What i find is from $0.30 to $1.40 monthly per barrel depends on location, tanker or pipeline, cavern, tank, ship.

That makes a bit sense.

Greg

Thanks for making me think a bit.. jajajja
More...

In theory it's the cost of storage which varies widely. Do NOT, I repeat, do NOT treat it like the carry in grains. Completely different. You will get run over.
 
Ok, I will not!!!

So I was just wandering how low the first spread can fall, i know there is no limit!! but a normal level to fall before sb thinks is enough and they start buying and covering..

I am short flys on the cl curve... and i am just sitting on them waiting to came more closer to expiration and to cover them at a nice price!!!

If you do not mind maybe you can explain the reason why is not good idea to treat it like in grains.

Thanks

Greg
 
greg25 said:
Ok, I will not!!!

So I was just wandering how low the first spread can fall, i know there is no limit!! but a normal level to fall before sb thinks is enough and they start buying and covering..

I am short flys on the cl curve... and i am just sitting on them waiting to came more closer to expiration and to cover them at a nice price!!!

If you do not mind maybe you can explain the reason why is not good idea to treat it like in grains.

Thanks

Greg
More...

Because there is a finite supply of grains in the US and a finite supply of acreage that gets allocated to the various crops. The cost of storage in grain elevators is relatively stable. Oil is a world market and it's stored all over the world. There is no "one" cost. It's also not a perishable like grains. Farmers know exactly how much to produce. The only variable is what the final yield is on a given crop. Oil has way too many unknowns. Producers drill based on their marginal cost not based on whether they can store oil or not. There is no convergence going into expiration. If anything, they tend to blow out the other way. If you understand the economics of the forward curve you will understand why this tends to happen.
 
Well, even if all the or a majority of the "knowns" are known, a perfectly reasonable basis differential can get blown to shit - even in softs and grains. I submit for your consideration Louis Dreyfus and the 2011 Cotton Market. Took futures contracts into delivery at a price point incredibly rich as compared to the OTR CTD grade. Crushed the other commercials. Market hasn't been the same since. Not close.

Mav makes a great point about oil. Actually, much of the Middle Eastern and South American crude is quite "sour". The PEMEX (Mexico) crude trades at a very cheap discount to WTI with the Gulf Coast refiners and distance is not a great factor per se. Problem is, refiners require deep discounts to undertake a refining run where their catalytic crackers have to sort through alot of trash like sulphur in order to get to the lighter distillates. There are, literally, dozens of grades of crude.
 
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