John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: rich evans who wrote (9457)	5/27/2008 2:27:07 PM
From: John Pitera	Read Replies (3) of 33421

In 1997 I witnessed a presentation done by Denise Palmer Huggins, she was the Houston branch head of NYMEX. She had a really interesting comment. In the big oil bust of 1984-86 when the near by crude contracts fell below 10 a barrell the strip going out 7 years worked it's way up to an average price of $19 a barrel. When we had the Iraq invasion of Kuwait and energy prices spiked to about $40 a barrel for the nearby contracts, again the forward 7 year strip rolled down gently and was pricing far dated crude contracts again at about $19. He comment at the time is that $19 is about the long term price of crude over longer periods of time. This $19 number has obvious moved significantly higher, but the key point is that we shall continue to see the long dated energy strip move above and below par with the nearby contract. Notice how Jan 2009 and Dec 2009 have already broken below the price of the nearby highest open interest spot month. I was an exceptionally rare environment for the whole curve to have been taken north of the spot month after such a parabolic run. The Top For WTIC should be in for 2008. John

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