Crude is screwed, man.

[Frederick Foresight]

I talk about spreads non-stop on the ACD thread.

Then I stand corrected. My apologies.

And yes, they are important for a short term speculative trader.

As for Fisher's book, it has been years since I looked at it, but I don't recall him ever mentioning them.

 

[Maverick74]

Here is one way to think about this. Physical players have very valuable data about the market that you or I will never have. They guard this data closely. What we can do though is observe what they do with that data by examining their footprints in the market. We can see their footprints in the forward curves. Think of this like tape reading. Back in the day I use to trade listed stocks and read the tape by examining how a specialist was bidding and offering for stock knowing that he/she KNEW what the order deck looked like. So by watching how a specialist used that information, I could figure out if there were more buy orders or sell orders left in his deck. This is the same thing. By examining the curve, I can peek at the dealers cards. It's only a peak, but it's better then guessing.

 

[Frederick Foresight]

Here is one way to think about this. Physical players have very valuable data about the market that you or I will never have. They guard this data closely. What we can do though is observe what they do with that data by examining their footprints in the market. We can see their footprints in the forward curves. Think of this like tape reading. Back in the day I use to trade listed stocks and read the tape by examining how a specialist was bidding and offering for stock knowing that he/she KNEW what the order deck looked like. So by watching how a specialist used that information, I could figure out if there were more buy orders or sell orders left in his deck. This is the same thing. By examining the curve, I can peek at the dealers cards. It's only a peak, but it's better then guessing.

I understand the rationale, I just didn't know how material or reliable it is.

 

[Zzzz1]

What are you talking about? While I would never trade against the trend the long term fundamentals clearly favor lower oil prices. The marginal cost of extracting oil outside the middle east clearly are going down over time. Less oil demand from renewable energies. Battery powered cars. New chemical compounds that reeuce crude derivative inputs. All those speak for lower oil prices not higher ones. But its way too early to even think of shorts

The trend is NOT down. The price of oil will go parabolic with time. The marginal cost to drill that oil will go higher and higher. Eventually it will be uneconomical to drill. At some point I imagine oil will be 500+. But we won't be able to extract it even at that price.

 

[Michael J. Fletcher]

Solar is what we need.

 

[Zzzz1]

That would have an adverse effect, sir. Higher prices in the backend incentivice producers to invest in new projects which will result in over supplies down the road.

Yes. Nobody in the energy industry looks at the front month. All modeling is done on the curves. The front month is noise. The market fundamentals are expressed in the curve and yes, they offer predictive value as they incentivize producers to either produce or store and they allow for the proper temporal allocation of resources across time.

 

[Zzzz1]

For the top oil producing nations this whole game is not about profit or profit margins at all. Hence the disagreements among opec mrmbers.its all politicized and about market share, especially between Iran and Saudi Arabia

Things aren't great for Saudi Arabia. Yes, their production costs are very limited. On the other hand, OPEC has been losing market share consistently over time. Shale and improved technology has brought a number of new producers online. OPEC flooded the market and drove prices down to try to bankrupt those producers. It worked somewhat, but it also inflicted pain on the OPEC side. Now, they've released the choke hold. Members of OPEC nations themselves have even said that $55-$60 is a sweet spot for them. Too much higher and there'll be more competition from the US and Canada shale producers among others.

ARAMCO could have been IPO'd at any time right? So it begs the question, why now. The Saudis understand the predicament they're in, and if you can get more revenue coming in, why not take it? If all was well in Kingdom I don't think you'd see this move. As for why anyone would buy the IPO, I don't know the details of the offering but I imagine some are looking at it more as a value play than a growth play unlike many IPOs.

 

[Zzzz1]

Forwards in any asset class have zero predictive value for short term trading, there is tons of research in the open that supports this point. Forwards are priced based on no arbitrage arguments and neither sport nor forward price changes now nor forward curves have any predictive value for tomorrows prices or price changes in 1 hour

I'm talking about needing the spreads as a speculative shorter-term trader. I ask because I don't recall references to spreads in the ACD thread. I don't follow the thread, and only read a post or two every few months or so, so if it is regularly or periodically mentioned, then I stand corrected. Also, I don't recall Fisher ever even mentioning the spread component in his book on ACD. But I don't trade using ACD, so I'm more of just a passerby.

 

[Zzzz1]

How so? Disagree vehemently. I traded and made markets in forwards of many many different underlying assrts and structured exotics using forwards all the time and could not disagree more with your assertion

I talk about spreads non-stop on the ACD thread. And yes, they are important for a short term speculative trader.

 

[Zzzz1]

That fact has nothing to do with forward curve changes now and their correlation with changes at t+n whatsoever.

Here is one way to think about this. Physical players have very valuable data about the market that you or I will never have. They guard this data closely. What we can do though is observe what they do with that data by examining their footprints in the market. We can see their footprints in the forward curves. Think of this like tape reading. Back in the day I use to trade listed stocks and read the tape by examining how a specialist was bidding and offering for stock knowing that he/she KNEW what the order deck looked like. So by watching how a specialist used that information, I could figure out if there were more buy orders or sell orders left in his deck. This is the same thing. By examining the curve, I can peek at the dealers cards. It's only a peak, but it's better then guessing.