Crude is screwed, man.
- Thread starter Overnight
- Start date
Whose fundamentals? I'm by no means an oil expert, of even amateur trader, but it seems to me that fundamentals don't mean anything when it comes to oil. Over the past year, all I see is headlines about how there will be OPEC cuts to production, and then they back out. You see deals with Iran, Russia, etc., and then they fall through. Lots of charts about what it costs to produce one barrel in SA vs. US, even insinuating that US production from shale isn't profitable, and then just the other day, charts are produced that show they are still profitable at above $25.
Then we get into the idea of peak consumption. Are we at peak consumption or not? If we are at peak consumption, but then we are also at peak production, then does this mean oil "should" go up? Imagine that, peak consumption, and yet price going up. If the price of oil keeps falling, then there is less investment in production, and so years later, they say, this will supposedly cause oil to spike higher because the supply side will be curtailed somehow since there won't be enough infrastructure to keep up with demand?
My point is that the fundamental aspects are quite arbitrary in my opinion, and the fundamentals change on a dime. Heck, even just one stupid weekly number of looking into a tank and seeing how much is in there makes this damn thing spike so much, and yet, somehow, fundamentals are supposed to actually provide a clear picture?
I'm not saying fundamentals don't mean anything, and of course the price of anything eventually comes down to the fundamental reasons, but everything I've seen written about oil changes like the wind, and if one of your biggest fundamental indicators is what SA or OPEC is "doing" or saying, then well, these guys are worse than Trump and his constant tweets, so I'm not sure how much fundamental analysis you can have there when the name of the game is say whatever suits you.
I'm not talking about punting on front month crude which is pure gambling (hence my horse race comparison). I'm talking about trading energy spreads where you can actually derive an edge and those spreads are highly dependent on fundamentals. Of course front month moves all over the place like a hooker on amphetamines. Why would you trade that shit? Learn about the spread markets and you will find your life getting a lot easier. Or don't. Just punt the front month around until you blow out and then get on the dole que.
I'm not either. What are the fundamentals then of your long term oil play? First of all, how far out are you talking (6 months, 1 year, 2 years)? Then are you saying its going up or down? And then what are the fundamentals behind this move?
Even if you get the fundamentals right, you're just as likely to be right or wrong about the direction in my opinion because every single fundamental fact is open to interpretation, and timing will always be a bitch.
So I still don't see how any shred of fundamental knowledge will actually result is making money from trading oil.
You and Mav are shouting past each other, which is a shame. If you took the considerable effort to learn more about the intramarket forward curve, you'd realize that commercials are constantly tweaking the oil market (and dozens of other physically delivered commodity markets) in terms of anticipated demand versus supply. Now - that is by definition real live fundamental knowledge and anticipation being priced into the market in a tangible and ongoing basis. If you knew how to properly model intramarket spreads you'd realize the serious opportunities in trading crude oil BEYOND just staring at the front month price ladder and scalping for tics. There truly is much more dimensionality to trading Crude Oil than your posts suggest. Just a thought for you to consider - not an argument.
http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_settlements_futures.html
Fair enough, but just the fact that there is so much movement in the price of CL means that nobody gets it right, doesn't it? I mean if you are so sure about the fundamental price of oil and what it should be, is this only your secret? Shouldn't the price be at whatever its going to worth?
You talk about tweaking the oil market, which once again is all about matching supply and demand. The demand is always a guess, just as much as supply is, and hence why they always need to tweak. The fact that this is priced into the market, and yet there are such huge swings, once again shows that they get it wrong, doesn't it?
If you really want to propose that your modelling is so good, then a simple call with time and price for 2 months, 6 months, and 12 months based on fundamentals would make me very happy and give us something tangible to evaluate. If this cannot be done so far out, it just tells me the fundamentals aren't really all that fundamental.
I have been waiting long enough for Mav to spill the beans on some interesting trade mechanics since I can't rely on PM replies, but I think we hit a dry hole.
The primary difference is fundamental coverage from news that you see is more reactionary and just tries to give an explanation to the latest price action of the market. People need justification, they do a search, and the press provides an explanation. Everybody's interest is served.
While the long term trader is more concerned about the persistence of carry/roll up and possible dislocations that could elevate the risks/change the forward curve relationship. They just have to hit the side of a barn and the fundamentals truly count.
You hear stories about carry traders getting a drubbing in forex now and then, right? Those guys were trading the same aggressive size (Heaven forbid, pyramiding because of a past looking metric of profitability/backtest) despite the elevated risks. And, these elevated risks are born from the simple fact that a high yielding currency appreciates until the government's eventual and sudden currency depreciation. So you better keep track of the economy, central bank, and current administration.
As for oil, I really don't know enough to give a good example (...pulls cards to chest...)...jk...(looks at flop)...no really....(stone face).
The primary difference is fundamental coverage from news that you see is more reactionary and just tries to give an explanation to the latest price action of the market. People need justification, they do a search, and the press provides an explanation. Everybody's interest is served.
While the long term trader is more concerned about the persistence of carry/roll up and possible dislocations that could elevate the risks/change the forward curve relationship. They just have to hit the side of a barn and the fundamentals truly count.
You hear stories about carry traders getting a drubbing in forex now and then, right? Those guys were trading the same aggressive size (Heaven forbid, pyramiding because of a past looking metric of profitability/backtest) despite the elevated risks. And, these elevated risks are born from the simple fact that a high yielding currency appreciates until the government's eventual and sudden currency depreciation. So you better keep track of the economy, central bank, and current administration.
As for oil, I really don't know enough to give a good example (...pulls cards to chest...)...jk...(looks at flop)...no really....(stone face).
Not a dry hole - an information ignorance gap. No serious oil trader who takes on risk based strictly upon fundamentals gets reliable information off the Internet or from cable TV business channels. In fact, DOE/EIA reports aren't going to tell you as much as you need. I don't think the Schork report is quite good enough in terms of fundamentals.
The best fundamental energy market information that I've seen available to the general public comes from Platt's on a subscription basis. Hands down. Bloomberg terminal has really upped its game with energy as well.
The best fundamental information unavailable to the general public is intraday barge, pipeline, and finished/unfinished product quotes and chitty-chat from OTC brokers.
The bigger obstacle is processing and understanding the cause and effects of what you're seeing and hearing. Another ignorance gap if you will.
I spent four years trading commercial energy and two years trading OTC energy for a HF. The knowledge and understanding and information flows are just a totally different level.
Dry hole was a joke on trying to get "a secret sauce". And, definitely a joke since Mav (as well as you) have always been forthcoming to ET readers.
But I agree with the ignorance gap, though a gentler term would be a "framing" issue. Unless I worked in the business or worked as a professional trader, it is quite a hurdle.
A practice that Linda Raschke would do as a flat price trader was to conduct her studies at the night and in the morning prior to frame the next day's activity in a forward looking manner. Flat price day traders would be best served as well.
I keep seeing this concept about "rolling". So I am guessing you had a position in an April future contract, and have lost .02 by rolling into the next month? What exactly is the "roll", and how do you do it with a future without losing your shirt?