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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: JimisJim who wrote (120869)	5/19/2009 12:00:45 PM
From: Paul Kern	Respond to of 206330

that the stored oil is not current "supply" but rather oil that has futures contracts on it -- it isn't for sale, but will be delivered (at higher prices) at some point in the future... meaning that current S/D is much closer to balance than it appears to be. Its called the contango trade. seekingalpha.com marketwatch.com en.wikipedia.org

To: JimisJim who wrote (120869)	5/19/2009 12:03:57 PM
From: kidl	2 Recommendations Respond to of 206330

Here is a guy with thoughts on this theory and he usually knows what he is talking about: investorvillage.com

To: JimisJim who wrote (120869)	5/19/2009 12:41:51 PM
From: axial	3 Recommendations Respond to of 206330

Jim, appreciate the response. "The author wrote that the stored oil is not current "supply" but rather oil that has futures contracts on it -- it isn't for sale, but will be delivered (at higher prices) at some point in the future..." I get that: it goes back to the idea of the Supply Slinky - bunched up in places, stretched in others. And hedging (which has become prevalent by both producers and end-users) would have the effect of raising spot prices. If I see it correctly (and I may NOT) it looks like end-user hedges anticipate a level of economic revival (and crude prices) that isn't gonna happen. OTOH producer hedges are locking in prices that will exceed spot by a wide margin. We should remember there's an unknown number of hedges locking in prices at old $100+ prices too. Put another way, we believe futures should be inverted: investopedia.com /07/contango_backwardation.asp Or simply, believe the futures have it wrong. If the pipe to end-users was straight (not a "slinky"), right now we'd see crude running in to storage tanks brimming at the top, and at the bottom not enough buyers. There's more coming in than going out, but inventory and supply prices are acting as if inventory is being drained. Nope: it's growing, and the only way to shut off supply is to drop prices so producers stop shipping. Artificially high prices are encouraging supply, and soon, it's all gonna fall off a cliff. That's my bet, anyway. --- I'm not writing this stuff because I understand, but because I'm trying to understand. Other thoughts and ideas greatly appreciated. Cheers, Jim