Sell April and buy May
Crude is screwed, man.
- Thread starter Overnight
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LR is a technical analysis trader, and that's just fine. In fact, I think that retail and most spec traders would be best served to confine their studies to the technical analysis of price data - precisely because of the information and understanding gap I described in my previous post. That's just my own personal opinion derived from years of trading and client work in the business - YMMV.
But if you're willing to pay for a subscription to Platt's and then to somehow gain the intimate understanding (on par with a commercial OTC Trader) and showcase your ability to disseminate then exploit what you're seeing (that's a big ask) then by all means avail yourself to becoming a fundamental hydrocarbons energy trader.
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Wait, so what you're saying is that first we have to pay someone to get fundamental information, which sounds ironic because fundamental information should be universal in my opinion, not based on some special research firm, but then you're also saying that we need an ability to disseminate this information? Is this because 2+2 sometimes doesn't equal 4?
Perhaps its a case of "here is one set of fundamental information", but this other piece of fundamental information might trump the first one. But of course, if this piece of fundamental information comes out that nobody suspected, then never mind all the other fundamental information you just read because its all no good now. (ie. surprise OPEC cut, surprise deal between countries, etc)
Does this sound about right?
Seriously, with all due respect, can someone just make a call about the direction of oil based on a few pieces of fundamental information and then we can see how it turns out? With technical analysis, we know price can go up, or down, or sideways. But it sounds like with fundamentals, there exist even more options. LOL
Right. I count over 81 ICE OTC Swaps for finished and unfinished crude oil products alone.
https://www.theice.com/products/OTC
Another bigger factor for products: the OTC bilateral physical market trades that are not financially cleared through ClearPort or ICE LCH. That's where Shell Houston Desk picks up the phone and sells tanker loads or pipeline runs to Valero Gulf Coast refineries. To say there is latency to the reporting of those trades is an understatement.
And, keep in mind that this does NOT include pipeline rates, storage rates, and tanker rates (hundreds of these). If you're going to be a fundamental trader then the basis components are frequently just as important as the commodity component when it comes to price influence.
From my experience as a commercial, prop and HF energy trader - fundamental information is far far away from being universal, broadly disseminated publicly or privately, nor is it presented in a format digestible to Joe Blow spec retail trader.
The only universal publicly-available (at some point) surprise that I could think of in terms of legit fundamentals would be something akin to a ship sinking in the Houston Ship Channel, a PADD 3 pipeline leak, or a major Gulf Coast refinery fire. And my strong inclination would be that the big boys would be in on that much quicker than Joe Blow spec retail trader. Trust me - if a Valero FCC Unit craps out their trading desk will definitely cover their production shortfall well before Valero's public information desk sends out a news release.
There are few surprises in the OTC market. OPEC negotiations and deals between countries mean that State-Run Oil Company trading desks and international Oil Companies with production agreements with Nation States have their trading desks involved. Few "surprises" among the big commercials.
Hell, when I traded commercial we had our own in-house Meteorological Staff and 24 hour outside Met experts on retainer. We even had a head start on the weather !
I'll repeat myself again - I think that retail and most spec traders would be best served to confine their studies to the technical analysis of price data - precisely because of the information and understanding gap I have described in my recent posts. That's just my own personal opinion derived from years of trading and client work in the business - YMMV.
That last price print you see is the ultimate distillation of all known knowledge about valuation for that product across the spectrum of market participants. Commercial traders do not allow prices to remain under or over-valued.
Build a good price model. Best idea - learn to trade the intramarket forward price curve.
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Bone, here is the issue. Energy unlike scalping ES, requires a lot of work. You and I both know this. It's why I do most of my trading in this sector because there are some real edges left. But the fact of the matter is, retail traders don't have a chance here and gotcha is proving that point. He has no idea what you are talking about. And he won't make the effort to learn. I really don't think most retail guys should be in this space. It's very complicated as you pointed out and simply buying oil because of some support level is about the stupidest thing I ever heard. Yet that is how these guys trade. It's a free world of course and they are entitled to try. The fact that you have to take the time and write out what you have when they simply could have googled it just shows you what you have to work with here. All they really need to go is go to cme.com and click on energy and they will see the merc lists over 100 different energy products of which 99% of the guys here probably have no idea what they are. And that is the is real problem. They don't know. Until these guys make the first few steps on their own and show an ounce of intellectual curiosity, you can't help them.
Will take profit at 48.35. Pricing is currently 48.11