John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (11376)	1/18/2009 3:11:37 PM
From: ajtj99	Read Replies (1) of 33421

John, since you're pretty good on the contango situations in oil, I'm wondering what your thoughts are right now with the extreme contango we're seeing between the front month and Dec. contract in oil. The extremely low front month price relative to the forward prices gives incentive to buy and store. However, with Cushing storage down to around 2-million available barrels of storage and tanker storage becoming short, it's likely tanker costs are going to be subject to bidding wars between storage interests and producing interests. My guess is the producing interests will win that battle, forcing up the price of storage and shipping, but ultimately bringing down the forward month price as it is no longer profitable to sell forward and store, which in turn would keep something of a ceiling on the front month price. That's my theory anyway.

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