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Gold/Mining/Energy : Copper - analysis

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To: Stephen O who wrote (1011)	11/20/2004 10:35:10 PM
From: TrueScouse	Read Replies (2) of 2131

Stephen: I wonder if you or someone else can explain something about the Futures open interest to me... Currently, the nearby contract is still November, with an OI of about 1,100 contracts. The most active contract (Dec) is the one that all the specs are trading, so presumably almost all the 1,100 Nov contracts are held by the trade -- i.e. producers who are short the market and will deliver to COMEX and fabricators who are long and intend to take delivery. Is this true? The reason I ask is that Nov is about to expire and there's still 1,100 contracts outstanding -- which represents over 12,000 T of copper. Nov Copper is trading about 6 cents higher than Dec. Given the critically low stocks in the COMEX warehouses, what happens if the producers fail to deliver? I realise that there are (just) enough stocks in COMEX to supply this number of contracts -- but supplies would become even scarcer. Is my understanding of this correct -- or is there something I really don't understand about the supply/demand fundamentals of the futures market? I'd appreciate any clarification from people in the futures industry who understand these things! Thanks, Howy

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