[CB00097]

Question from a long-term lurker, first-time poster....

First, I'm an energy equity investor and tend to know my way around as I have my Canadian Securities Course (Stock Brokerage Certification) under my belt and a numbers background, but I'm finding a lot of the commodity market movements to be short-sighted and counterintuitive to the point I have increasing concerns.

Bottom Line Question: Is there any chance we're getting crude oil market manipulation (most likely to provide relief for the consumer and to allow the US majors to make lowball offers to add produciton around the world at discount prices)?

It just seems too convenient that ALL the traders out there are overlooking the SPR inflows (not sustainable and will eventually need to be replenished), the fact the world is shipping their refined product inventories to the USA (not sustainable, ending this month, and will need to be replenished), that demand destruction has not occurred in a meaningful way for gasoline even with the temporary loss of a quarter million cars in Louisiana and Mississippi, and the fact that winter is guaranteed to arrive one day at which point our heating oil and natgas inventories will start to draw down.

Additionally, in the longer term with the combination of rig shortages and the possibility that depletion models may be dramatically understating the potential falls (2% accepted versus 5%-8% potential), we could have some very serious shortages very soon which I would think should be pushing crude up, not down.

Thanks in advance for you opinions....

Best wishes,


Matthew.

[cube]

$this->bbcode_second_pass_quote('MrBill', '.')...
It can be too dangerous if you convince yourself you are right and the market is wrong. Last summer I just could not believe the rally we were in so I fought against it like a salmon swimming against the current only to die exhausted having reach their goal.
....

[donshan]

$this->bbcode_second_pass_quote('CB00097', 'Q')uestion from a long-term lurker, first-time poster....

First, I'm an energy equity investor and tend to know my way around as I have my Canadian Securities Course (Stock Brokerage Certification) under my belt and a numbers background, but I'm finding a lot of the commodity market movements to be short-sighted and counterintuitive to the point I have increasing concerns.

.

[CB00097]

$this->bbcode_second_pass_quote('donshan', '
')
I decided a long time ago not to try trading in commodity markets because I would be a small fish swimming in a pool of very big, very smart sharks. Big fish eat little fish.

The big fish "smell" where positions of little fish are located and push the market up or down just enough to make them abandon their positions at a loss. The sharks then gobble up assets at what turn out to be bargain prices in the longer term trend.

[MrBill]

First of all, thanks for the comments, I really appreciate the feedback.

RE sharks, minnows & manipulation

Exchange traded products like futures always behave somewhat differently than cash markets or continuously traded markets such as foreign exchange because there is an open and a close to the market. The market that closes, and then the day's profits and losses are calculated, margin calls are made, is going to experience short squeezes or profit taking bahvior as traders square their positions or trim losses ahead of the close.

I would have been much better off yesterday had I took profit earlier in the day ahead of the NY open. As it is I carred 2/3 of my overall long on the way down. I was out of the office for 90-minutes and when I came back we had already lost a lot of ground in the first hour of trading on the NYMEX even though the IPE and ACCESS had been very well bid up to that time.

I find the NYMEX so much more volatile than the ACCESS (afterhours trading system for the NYMEX) or the IPE (now called ICE). I think this is the difference between an electronic exchange and an open outcry exchange. For some reason the open outcry is especially prone to overshoot. The traders' fear, greed, optomism or pessimism must feed off one another's?

I was the world's worst pit trader on the Winnipeg Commodity Exchange. I was not loud enough or big enough to get my orders executed. I had two big brokers stand by me and execute my orders. So I have to admit that your order execution is only as good as your floor broker on the NYMEX, whereas if you trade on the IPE your bid or your offer is guaranteed to be done if the market trades on or through your level.

However, in general, large player's are not trading with their own money, but rather their firm's cash. This creates an assymmetrical reward-loss profile. Simply put, if you make money, you get a big bonus. If you lose money you lose your job, but you can usually get another job unless you're completely useless. Therefore, there is every incentive to take big bets with your firm's money as if you are successful you can translate that into a bonus for yourself, not to mention the best traders get promoted in many firms.

What does that mean? Well, if I am trading with my own money I have to be very careful and pick my entry and exit points well to minimize the size of my stop losses. If it is not my money, I could afford to be more aggressive. So if I sniff around the market and figure out where the stop losses are, I can sometimes push the market in that direction to trigger stop loss selling, for example, and then stick my bids in lower which have a good chance of getting done. If everyone is using technicals and we are all trading off pretty much the same levels then it is not too hard to figure out where the stop loss levels are either. Say, just below the previous low, for example.

So, let's say we were near the bottom and I needed to buy 200 lots. It may be worth my while to sell 100 first. Trigger the stop losses and then be an aggressive buyer of 300 lots below the current market price. Sure I might lose money if I am wrong, but the larger you are the less you care. You take a short term hit which the small trader cannot afford, but in the long run you know this strategy will work more often than it fails.

It is not fair, but that is the way it works, so you have to be aware of it and make sure when you set your stop loss and take profit levels that they are not identical to everyone else's. In general, I sell just below any major chart levels and I buy just above them. Say, 95 and 05 instead of at 00. Then if there is a stop loss point, I set my own stop loss below where I think everyone else's will be. Say, the stop losses are at or below 00 I might put mine at 85 or 15 on either side. The extra 15 points makes a small difference to my P&L and it might keep me in my favored position while everyone else with tight stop losses gets taken out.

Sometimes I think the world is out to punish me personally. I missed so many sell levels this week by 3-7 points. The rallies stopped just short of my sell levels and then it tanked. Disappointing yes. However, you have to buck it up and take it like a man. The market has nothing against me personally. It is just a zero sum game. So my loss is someone else's profit. Therefore, I have to be just a little more clever than the next person. You start out with a 50/50 chance and through hard work you try to improve your luck to 60/40. Then it is all money management. Making sure your profits are bigger than your losses. That takes discipline but a little luck never hurts.

RE one year. Well, let's just say I am in my minnow stage in the energy pond, but overall I have been swimming in shark infested waters now for almost twenty years.

[MicroHydro]

I am loving life right now, very nice last two days in metals, and took adsvantage of the low prices to buy Feb 06 heating oil and August 06 unleaded gasoline.

[MrBill]

$this->bbcode_second_pass_quote('MicroHydro', 'I') am loving life right now, very nice last two days in metals, and took adsvantage of the low prices to buy Feb 06 heating oil and August 06 unleaded gasoline.

[teemu]

$this->bbcode_second_pass_quote('donshan', 'I') decided a long time ago not to try trading in commodity markets because I would be a small fish swimming in a pool of very big, very smart sharks. Big fish eat little fish.

[MrBill]

$this->bbcode_second_pass_quote('teemu', '')$this->bbcode_second_pass_quote('donshan', 'I') decided a long time ago not to try trading in commodity markets because I would be a small fish swimming in a pool of very big, very smart sharks. Big fish eat little fish.

[CB00097]

$this->bbcode_second_pass_quote('', 'W')hat does that mean? Well, if I am trading with my own money I have to be very careful and pick my entry and exit points well to minimize the size of my stop losses. If it is not my money, I could afford to be more aggressive. So if I sniff around the market and figure out where the stop losses are, I can sometimes push the market in that direction to trigger stop loss selling, for example, and then stick my bids in lower which have a good chance of getting done. If everyone is using technicals and we are all trading off pretty much the same levels then it is not too hard to figure out where the stop loss levels are either. Say, just below the previous low, for example.

So, let's say we were near the bottom and I needed to buy 200 lots. It may be worth my while to sell 100 first. Trigger the stop losses and then be an aggressive buyer of 300 lots below the current market price. Sure I might lose money if I am wrong, but the larger you are the less you care. You take a short term hit which the small trader cannot afford, but in the long run you know this strategy will work more often than it fails.

It is not fair, but that is the way it works, so you have to be aware of it and make sure when you set your stop loss and take profit levels that they are not identical to everyone else's. In general, I sell just below any major chart levels and I buy just above them. Say, 95 and 05 instead of at 00. Then if there is a stop loss point, I set my own stop loss below where I think everyone else's will be. Say, the stop losses are at or below 00 I might put mine at 85 or 15 on either side. The extra 15 points makes a small difference to my P&L and it might keep me in my favored position while everyone else with tight stop losses gets taken out.

[MicroHydro]

$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('MicroHydro', 'I') am loving life right now, very nice last two days in metals, and took adsvantage of the low prices to buy Feb 06 heating oil and August 06 unleaded gasoline.

[MrBill]

Today's news comments by the firm formerly known as Refco

$this->bbcode_second_pass_quote('', 'N')ews:

· Indonesia’s OPEC governor Maizar Rahman said OPEC is “satisfied” with crude prices near $50 because it closely represents global supply and demand.

· Russia’s Novorossiysk oil port shut Friday due to a gale warning

· Mexican crude oil exports rose almost 14% to 1.908-mbpd, their highest level this year, in October though output fell to 3.221-mbpd from 3.367-mbpd September.

· Baker Hughes weekly rig count down 1, up 210 year-on-year. Oilrigs were up 24.

· Louisiana reports 53.5% of oil production or 108,747-bpd has been restored

· MMS update reports 702,556-bpd or 46.84% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 88.540 million barrels or 16.172% of annual Gulf output. There were also 145 platforms and 5 rigs evacuated, or 17.70% of 819 manned platforms and 3.73% of 134 rigs currently operating in the Gulf.

Refinery news:

· A fire in a 12,500-bpd coker unit at Pasadena Refining’s 110,000-bpd Pasadena, TX refinery didn’t injure any workers and the rest of the plant was operating normally.

[MrBill]

Here is today's news. Comments to follow later. Thanks.

$this->bbcode_second_pass_quote('', 'N')ews:

· OPEC president Sheikh Ahmad Al-Sabah said he doesn’t expect members to cut oil production at its meeting in Kuwait on December 12 and he is comfortable with prices where they are. Only if prices fell dramatically would production be cut. He also said the 2-mbpd in spare capacity made available at the September meeting would still be on offer though there have been no takers.

· Qatari oil minister Abdullah bin Hamad al-Attiyah said he is concerned about a potential glut in the global oil market in Q2 2006. He does not foresee $70 as a long-term price for oil.

· Indian oil minister Mani Shankar Aiyar said Indian oil demand is still excessively strong. He blames high oil prices in part to speculation by mutual funds.

· Abu Dhabi National Oil Company CEO Yousef Omair Bin Yousef said the UAE will increase oil output by 200,000-bpd to 2.7-mbpd next year.

· Petrologistics revised down its estimate of OPEC’s Oct oil production by 400,000-bpd to 29.9-mbpd from the earlier estimate of 30.3-mbpd.

· MMS update reports 633,064-bpd or 42.20% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 90.494 million barrels or 16.529% of annual Gulf output. There were also 139 platforms and 1 rig evacuated, or 16.97% of 819 manned platforms and 0.75% of 134 rigs currently operating in the Gulf.

Refinery news:

· Delek USA plans to temporarily shut an FCC unit at its 54,000-bpd Tyler, TX refinery Nov 28 ahead of scheduled maintenance.

· Valero said two trains at a sulfur recovery unit at its 240,000-bpd Port Arthur, TX refinery were shutdown unexpectedly Saturday though the flaring event ended on Sunday. Production was expected to be only marginally effected.

[cube]

I think what we're seeing here is a change in the general trend from down to up. I'm not sure what's the technical term for it. The long term trend may be up but there may be ups or downs that last anywere from 1 to 3 months.

Last week's low for CLF06 was 56.40 on Nov 18th. I don't think the price will be dipping down to that level again from here on out. But hey I could be wrong. I'll find out next week. For now I've got other things worry about like baking a pie for thanksgiving. Yeah I know that has nothing to do with commodity futures...but it's important to think about other things in life too. I think one of the major reasons why people don't last in this "game" is because it consumes them. A day trader (no matter how brilliant) who cannot "leave work at work" (very difficult to do when you've got a computer in your bedroom) will eventually fail. Why? B/C he'll eventually either get a heart attack or a mental breakdown. Take your pick. just a theory...

[MrBill]

$this->bbcode_second_pass_quote('cube', 'I') think what we're seeing here is a change in the general trend from down to up. I'm not sure what's the technical term for it. The long term trend may be up but there may be ups or downs that last anywere from 1 to 3 months.

Last week's low for CLF06 was 56.40 on Nov 18th. I don't think the price will be dipping down to that level again from here on out. But hey I could be wrong. I'll find out next week. For now I've got other things worry about like baking a pie for thanksgiving. Yeah I know that has nothing to do with commodity futures...but it's important to think about other things in life too. I think one of the major reasons why people don't last in this "game" is because it consumes them. A day trader (no matter how brilliant) who cannot "leave work at work" (very difficult to do when you've got a computer in your bedroom) will eventually fail. Why? B/C he'll eventually either get a heart attack or a mental breakdown. Take your pick. just a theory...

[MrBill]

Today's new courtesy of Refco Overseas London

$this->bbcode_second_pass_quote('', 'N')ews:

· US energy secretary Bodman said he was confident Saudi Arabia can meet its target to expand oil production capacity. The kingdom is planning to expand to 12.5-mbpd by the end of 2009 from 11-mbpd at present in addition to refinery projects including a joint venture with Shell in Texas and Louisiana. *

· Mexico plans to increase oil output by 100,000-bpd to 2.05-mbpd in 2006 despite expectations that the Cantarell field will begin to decline. In October, PEMEX exported 1.905-mbpd or 42,000-bpd short of its 2005 export target of 1.95-mbpd.

· WSI forecasts a mild winter in the South but cold in the North and Pacific Coast. In December, warmer-than-normal weather is forecast in the Northeast, Southeast, South Central and Southwest. Cooler-than-normal weather is seen in the North Central and Northwest regions.

· AccuWeather forecasts cold weather in the East Dec-Feb excepting South Florida, which will see near-normal temperatures. The winter is expected to be cold and snowy from the Great Lakes to New England.

· MMS update reports 621,233-bpd or 41.40% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 91.116 million barrels or 16.642% of annual Gulf output. There were also 135 platforms and 1 rig evacuated, or 16.48% of 819 manned platforms and 0.75% of 134 rigs currently operating in the Gulf.

Refinery news:

· Exxon Mobil’s 190,000-bpd Chalmette, LA refinery has returned to normal production following its shutdown due to Katrina.

[MrBill]

Okay, so the high risk short worked.

We dipped from $59.15 (58.95 when I came in) to $58.22 in the JAN Wti, while Brent fell from $56.60 to $55.75. The sell-off however came from gasoil which lead dipping to 52750. Heating oil and nat gas obliged by dipping to $1.7723 in the JAN heating oil and around $11.30 in the DEC nat gas before recovering slightly ahead of the inventory nos. The JAN unleaded gave up gains down to the 1.5340 level. We are broadly off the lows heading into the NY open and the EIA inventory data in 35 mins. I guess if you are expecting a rally, a sell-off ahead of the no.s helps to shake the weak longs out of the low hanging branches. And sets us up for a higher correction on short covering ahead of colder weather on the long weekend.

I sold, took profit, and used the dip to get long JAN Brent and JAN heating. I am more worried about heaving heat than I am the crude. I stuck in another bid below here on a dip after the nos. I am a seller again just ahead of last night's/today's interday highs as I am not sure of direction after the weekend and we are still in the formative stages of a correction and not yet a reversal to the overall down move. Better to be as conservative as possible this afternoon. I can tweak my position in the Brent tomorrow and Friday when the NY traders are celebrating Turkey Day.

[MrBill]

MARATHON ASSET MANAGEMENT TO PURCHASE REFCO'S EUROPEAN BUSINESSES

$this->bbcode_second_pass_quote('', 'N')ews:
· Iraqi oil minister Ibrahim Bahr al-Uloum said crude oil output should reach nearly 2-mbpd by year-end from 1.8-mbpd currently.

· IEA executive director Claude Mandil said oil prices are too high even at $50 with production outstripping consumption. “We should see lower prices, but you never know.”

· A Reuters survey forecasts US oil will average $57.87 in 2006, up from $57.40 in 2005. The average in 2004 was $41.47. Prices are seen falling $15 in the next five years to $$42.65 in 2010.

· Baker Hughes weekly rig count up 13, up 240 year-on-year. Oil rigs up 10.

· Louisiana reports 2,808 wells or 47.2% of the 5,949 wells have been restored since Katrina and Rita while 2,468 or 41.5% remain shut-in and the status of the remainder is unknown. Estimated restored oil production is 112,704-bpd or 55.5% of daily oil output.

· MMS update reports 615,623-bpd or 41.04% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 91.731 million barrels or 16.755% of annual Gulf output. There were also 134 platforms and 1 rig evacuated, or 16.36% of 819 manned platforms and 0.75% of 134 rigs currently operating in the Gulf.

[MicroHydro]

Yi, yi, yi. I have lost a lot of equity in energies over the last 90 days. Thank goodness for precious metals. At this point my entire commodities portfolio is +69% for 2005, despite some mediocre market timing. I guess genius really is leverage and a broadly rising market.

[MrBill]

$this->bbcode_second_pass_quote('', 'N')ews:
· Saudi oil minister Ali Naimi said OPEC is unlikely to cut output when ministers meet in Kuwait in December. Oil prices are still “a little high” despite oversupply in the market and OPEC will strive to moderate them.

· Petrologistics estimate OPEC Nov output is up 600,000-bpd to 30.5-mbpd with Saudi output at 9.6-mbpd, up from 9.15-mbpd, and Iraqi output at 1.9-mbpd, up from 1.75-mbpd.

· OPEC president Sheikh Ahmad al-Fahd al-Sabah said OPEC would like to see global oil stocks rise to 56 days of forward cover to prevent large price spikes. The IEA reported forward cover at 52 days in September.

· Algerian energy and mines minister Chakib Khelil said he expects oil prices to remain above $50 in Q1 2006 “with the cold weather coming.” He also said he expects OPEC to leave output unchanged at December’s meeting because “supplies are sufficient.”

· Iraq’s 1H Basra oil exports are seen at 1.5-mbpd, up slightly from current term contracts of 1.47-mbpd though lower than the 1.7-mbpd for the first half of 2005. But if the northern pipeline is operable, Iraq’s total exports could reach 1.7-1.8-mbpd in 1H and 2-mbpd in 2H 2006.

· Statoil restarted its 100,000-bpd Norne oilfield Saturday following an oil leak that prolonged a planned two-day shutdown.

· Louisiana reports 113,078-bpd or 55.7% of capacity has returned

· MMS update reports 594,421-bpd or 39.63% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 94.767 million barrels or 17.309% of annual Gulf output. There were also 133 platforms and 1 rig evacuated, or 16.24% of 819 manned platforms and 0.75% of 134 rigs currently operating in the Gulf.

Refinery news:
· Giant Industries’ 62,000-bpd Yorktown, VA refinery is completely shut for up to a month following explosions early Friday that sparked a fire in a FCC unit.

· Exxon Mobil plans to shut a hydrogen generation unit at its 557,000-bpd Baytown, TX refinery December 5 for an overhaul.