ICE Opportunities vs. CME/Nymex - Spread Markets

bone

bone

Just a nudge here. There is a general assumption to some traders that ICE contracts are largely an analog to the Nymex contracts. With Spread Trading, that is not necessarily the case. With some regularity (not uncommon) we find intramarket spread trade entry opportunities in, for example, the ICE GasOil forward curve that are quite different from CME/Nymex Heating Oil. Same holds true for WTI forward curve compared to Brent.

You have to remember that these futures are physically delivered products with very different geographical delivery contract specs. They serve different parts of the globe. And the forward curve is all about commercial supply expectations and needs.
 
Interesting point. Would it be fair to say these differences are most observed in the prompt months, where supply & delivery factors are most pronounced? Perhaps the expectations for the back months of the curve, beyond the prompt year, are not too different.
 
Trader13 said:
Interesting point. Would it be fair to say these differences are most observed in the prompt months, where supply & delivery factors are most pronounced? Perhaps the expectations for the back months of the curve, beyond the prompt year, are not too different.
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No, the opposite is true. The prompt months are strictly about spec orders flows and from a commercial aspect VERY near term demand requirements. In fact, prompt month commercial demand for physical delivery typically drives the bilateral OTC Swap market first. Back month curve configuration reflects expected supply.
 
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bone said:
No, the opposite is true. The prompt months are strictly about spec orders flows and from a commercial aspect VERY near term demand requirements.
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I guess I was thinking more about NG than the energy markets you referenced. The prompt months in NG are quite impacted by near term supply/demand dynamics. The oil complex could be different.
 
Trader13 said:
I guess I was thinking more about NG than the energy markets you referenced. The prompt months in NG are quite impacted by near term supply/demand dynamics. The oil complex could be different.
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NG is very weather driven and the prompt month has to absorb the burden of variation in weather driven demand.
 
bone said:
Just a nudge here. There is a general assumption to some traders that ICE contracts are largely an analog to the Nymex contracts. With Spread Trading, that is not necessarily the case. With some regularity (not uncommon) we find intramarket spread trade entry opportunities in, for example, the ICE GasOil forward curve that are quite different from CME/Nymex Heating Oil. Same holds true for WTI forward curve compared to Brent.

You have to remember that these futures are physically delivered products with very different geographical delivery contract specs. They serve different parts of the globe. And the forward curve is all about commercial supply expectations and needs.
More...

The Brent curve is definitely where the action has been. Bone do you track VLCC transatlantic cargo prices?
 
Maverick74 said:
The Brent curve is definitely where the action has been. Bone do you track VLCC transatlantic cargo prices?
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Since I no longer have somebody paying for a Bloomberg, I get daily Platt's data. For swing trading purposes, I strictly rely upon price.
 
I've never really found any publicly disseminated or private subscription data that has given me a legit repeatable "jump" on price action in terms of being an independent speculator. That's my experience, YMMV. For myself, I find that the last price print reflects all of the distilled knowledge from ALL sources public and private with respect to a particular product or name. Having said that, gaining detailed mechanical knowledge about why the forward curve moves from a fundamental basis perspective can be useful for a specialist.
 
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