What do the oil/commodity bubble foks has to say to Rick Santelli?

[Pa(b)st Prime]

Quote from Daal:

http://www.cnbc.com/id/15840232?video=753754816&play=1

his point is a very good one, on the last day of the contract there is no speculative bid or ask, you have the true economic players AGREEING to exchange oil at a price. thats the pure price of the commodity, he reports that he did not see prices nose diving on that last day. the guy he was arguing with looked like have never faced that argument in his life and kept trying to change the subject by saying specs roll over, exactly, on the last day you have the price ex-speculation

Everyone was correct in their own way. It's true that the entire open interest in the expiring month could roll. Ton's do. Look at spread volumes on expiration. Big. However Santelli's point is more on target.

It matters little who wants to take delivery. Chances are it is a commercial spreader who'll just re-deliver next month. However
if there was a glut of oil sitting around uncommitted in Cushing or wherever then producers would be selling the shit out of the front trying to make delivery. That selling pressure would evidence itself in the spread between the expiring contract and the second option month. Since the spread stays steady it doesn't appear speculative forces are distorting spot.

On the other hand I could argue-and we've seen squeezes in Chicago Wheat back in 2006 and in Mnpl this year-that if cash supplies are truly diminished it's almost impossible for anybody to make delivery and short covering of historic proportion takes place. Oil doesn't trade like anyone at all is squeezed. Did we see a $13 up day? Heck grains have 10% days all the time.

There's been a zillion reasons why oil has rallied and I'd put NYMEX speculation and Bush as the 2 biggest non-sequiter urban myths in the whole affair.

 

[nazzdack]

Quote from Ivanovich:

Yes, but you're not answering my question. Or perhaps I'm not asking it right. On the last day, the price opens at a point -what determines that opening point? The day before, right? The fact that these supposed speculators are rolling over contracts to the subsequent month doesn't affect the price. It's not like they're selling. So the opening price remains unmoved at that point and the speculative behavior moves to the next contract month.

In otherwords, it seems (again, I'm not a pro) like the last day of the month is the settling day for the price. All the trading activity has gone out of it.

1) The open is determined by the existing and new orders that come into the market.
2) The closing price is usually the midpoint of the closing range.
3) On Last Trading Day, the closing price should converge to the cash market or underlying index.
4)

 

[nazzdack]

Quote from Daal:

as far as I know thats not right. the specs will be selling the old and buying the new front through a spread order(roll over), its the arbritrageurs that will keep the market in check(if the old goes down too much they will bid, take delivery and sell against the new front or backs, im talking of storables here), but the bottom line is that once they got out what will determine the price will be economic supply and demand not the last trade price.

if a group of idiots trade apples futures at $100 each apple for a month when they get out of the way real buyers wont bid and the real sellers of course will hit every bid that appears, thats a recipe for a price collapse, nobody has a gun on their heads to accept these prices simply because it closed there on rollover day.

im not an expert in futures so maybe nazzdack or pasbt prime can chime in and tell me if im wrong

1) You're wrong! Just kidding. You seem to be assuming that specs only trade on the long-side of the market.
2) The commodity exchanges emphasize that they are risk transfer mechanisms, not delivery/merchandising mechanisms.
3) I'm done.

 

[wutangfinancial]

yes, the price of oil is the price of oil. Talk to any trader for an energy company.

Don't let retarded media outlets fool you.

Morons, such as some of the dummies on this board, are allowed to "speculate" on a decline in prices. They would, of course, be wrong. But no conspiracy is stopping them.

And yeah, I'm biased- I've been long oil on every dip since 2005. I will continue to be long on every big dip until a viable alternative to oil comes online. I'm making money, my engineer friends are making money, my big oil trader friends are making money, and my geologist friends are making money.

 

[daddyeaux]

my broker wants everybody out 3 days before FND..

failure to do so and you get an e-mail with a trade confirm along with some unpleasantries