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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: ggersh who wrote (17678)	2/15/2009 5:02:55 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 71456

I see the point... being long RB (and half short HO to profit from the turn), but what most commentators miss is the production cycle in a bear market. It is true that spot oil is dropping every month towards delivery because of acute supply glut (and supply glut is due to limited storage and limited production capacity). In longer deliveries oil is no longer dropping; and second, there is alot of hedging, buying in RB for the summer months (everybody could see that the RB/HO spread went from 60 to nearly 0 in a couple of weeks). Why limited supply in RB: Refineries might curtail production at too low RB prices - as another poster pointed out that a refinery can not turn a profit, and at the time in December RB dropped below one. Now the recent development is that RB sellers are scarce because of lower anticipated production levels, and that was the key to near backwardation in RB (and partly HO) contracts. As a result far out RB is cheap compared to crude levels and near term RB is way too expensive... only that no one can make use of that distortion. Ultimately the key to higher crude is higher demand by refiners but that can take some months. It will, of course happen: Demand might pick up, and at the same time OPEC will insist on cutting back oil production...then the things will turn.