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hardnox604008
Advisor

Some thoughts on oil

A couple things-

 

the near term (???????) threat to supply is driving the contango out of oil futures. That would seem to indicate that the market will buy the large (and unknown, it is a thoroughly opaque market) amount of oil sitting in floating storage will be brought to market. Like a grain elevator when the hedged carry goes out of the market, it is time to unload. Maybe good- there's a bit of slack to get by- maybe bad if the little bit of slack gets taken in and we happen to find out that OPEC really doesn't have a lot of spare capacity- a very real possiblity.

 

But remain calm, all is well. We have this under control.

 

Second- worth noting that energies have been the worst performing segment of the major commodity indices in the previous quarter. That would indicate that money will be rebalanced out of grains, softs, metals and INTO energies. Just what the doctor ordered.

 

Non-commercial longs in NYMEX oil look to be about double what they were at the top in '08. That should provide some fireworks of some sort.

 

BTW- wanna know why wheat went to the teens in '08? Well, if you are printing money internally within a commodity index fund that is long oil, which went to $100 plus then that newly minted money then gets rotated into grains, among other things.

 

Pox on index funds which are evil.

 

fwiw, h

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6 Replies
GoredHusker
Senior Contributor

Re: Some thoughts on oil

I just finished reading an article that stated we set a new all time record in the amount of noncommercial net longs in crude oil this month.  While index funds are evil, they're just playing the hand that is dealt to them by none other than the Bernank.  The more he ramps up the printing presses the more the dollar goes down.  As the dollar goes down, the index funds buy buy buy.  I can't necessarily blame them knowing that hard assets hold their value a lot better when the currency implodes. 

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Artifice
Senior Contributor

Re: Some thoughts on oil

double non commercial length =s bubble.   oil is just oil. because someonee buys for insurance doesn't mean it goes up more.

 

indexers provide artificial premia for producers to collect.  Wheat was short in 2008,

 

no one ran out with teh money supply and took wheat to 13.

 

CBT SRW has a good crop coming and is facing reality.

 

Nut specs maybe be loaded but is it down 150  like nuttin happened.

 

March to destiny

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Artifice
Senior Contributor

Re: Some thoughts on oil

Between 1980 and 2000 wheat went from 5$ to 2.35.

Why ? because the money supply grew and grew nd grew.

Producers borrowed $$ ( M grows) and more and more wheat was produced.

 

The economy gets bigger and bigger

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rightone
Senior Contributor

Re: Some thoughts on oil

Add up the whole futures trade on oil, and theoretically the WHOLE world supply trades 7 to 10 X per day.

 

To bad those fund managers cannot find something REAL to put YOUR money to better use.

( yep your pension, 401k plan fund etc appears to really like oil...at times ) 

 

How much does the futures cushion ADD to the price of real crude? 

Estimated to be a 30 to 50% UP factor for bull run crude markets.

 

Basically the 110 oil today would be in the $70 to $75 range.

 

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Artifice
Senior Contributor

Re: Some thoughts on oil

april crudee oil closed yesterday, at 104.40, the day this thread was started.

 

Yes wild waves of speculation can come in and move the market higher and yes it takes time for production to respond to high prices but thhat is what this is all about.

 

High prices incite supply. There are all kinds of oil sources thw world over. Just read thee annual of  SAnadrko Pet. mass @s of prospects.

 

High corn, what bean prices? it ain't permanent, producers react!

 

this lets feel good, it s a new era is damaging.

 

Businessmen collect the fat premium in prices.

 

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Artifice
Senior Contributor

Re: Some thoughts on oil

theme 100+ is unsustainable. Incent to produce more is too high/

 

++ the changes underway in the M-E will invite greater investment there.

 

Look at Lybia, they get little world energy investment now, political risks too high,

soon? the table is turned and they can produce 2-3 Xs as much.

Long term outlook= lower.

Artifice

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