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Oil takes pounding on Dec futures expiration

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Oil takes pounding on Dec futures expiration

Unread postby toolpusher » Thu 16 Nov 2006, 18:15:49

oil took a pounding today, and from the looks of the chart, it fell off a cliff starting around midday.

although my portfolio took a beating too, i myself remain cool and calm. i note that the adx has been diverging from price on a number of occasions.

price action is also diverging from fundamentals, so, lets see how much lower she goes. buy low, sell high, easy to say, hard to do.
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Re: wti hammered badly on dec expiration

Unread postby DantesPeak » Thu 16 Nov 2006, 18:36:29

The January 2007 contract is trading $2 higher and will become the front month soon.

So I suppose most (but not all) of today's move relates to the expiration of the December contract.

Still this is quite strange, since US oil/product demand is growing rapidly these last few months.
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Re: wti hammered badly on dec expiration

Unread postby zberry » Thu 16 Nov 2006, 18:56:52

Indeed that appears to be the case. An article just posted at FSN describes it. Sure explains a lot! The games people play!
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Re: wti hammered badly on dec expiration

Unread postby joewp » Thu 16 Nov 2006, 19:54:28

$this->bbcode_second_pass_quote('DantesPeak', 'S')till this is quite strange, since US oil/product demand is growing rapidly these last few months.


I think they want to drop gasoline stocks to zero so they can clean out the storage tanks. Well, that's what this chart looks like!
Image

Oh, and it's not like they're building up on distillates either.
Image

So it doesn't look like this market gives a hoot about supply and demand.
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Re: Oil takes pounding on Dec futures expiration

Unread postby pup55 » Thu 16 Nov 2006, 20:04:50

$this->bbcode_second_pass_quote('', 'U')S oil/product demand is growing rapidly these last few months


Agreed. We have been following this carefully. The inventory situation right now, if anything, is bullish.

Here's Bloomberg's take on the news:
Bloomberg

$this->bbcode_second_pass_quote('', 'O')il had the biggest one-day decline since August 2005 in New York trading on speculation that members of the Organization of Petroleum Exporting Countries won't cut output. Crude for December delivery slid 4.3 percent to $56.26 a barrel.

The drop in oil and the Labor Department's report that the consumer price index fell 0.5 percent last month followed data this week that showed producer prices had a record decline.



Yahoo

$this->bbcode_second_pass_quote('', 'T')he price of oil sank by more than $2 a barrel Thursday, settling at its lowest level in a year as traders focused on the bearish aspects of conflicting market trends. OPEC is cutting output, but the U.S. economy is slowing; winter is near, but the country has an abundance of home heating fuels.
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Re: Oil takes pounding on Dec futures expiration

Unread postby Cobra_Strike » Thu 16 Nov 2006, 20:50:58

The price volitility is sickening, good thing I do not give a shit about 'making money' in the markets...as I hold no illusions as to my financial future.
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Re: Oil takes pounding on Dec futures expiration

Unread postby joewp » Thu 16 Nov 2006, 21:56:26

$this->bbcode_second_pass_quote('pup55', '
')Here's Bloomberg's take on the news:
Bloomberg

$this->bbcode_second_pass_quote('', 'O')il had the biggest one-day decline since August 2005 in New York trading on speculation that members of the Organization of Petroleum Exporting Countries won't cut output. Crude for December delivery slid 4.3 percent to $56.26 a barrel.


I think this is BS. Obviously we know that OPEC did cut, and if we know so do the traders. About the only reason I can think of is they want the oil price down so there's a good Christmas selling season. It seems they'll take inventories down to dangerous levels to do it, too. Just so they can rake in cash on the stock market. This happened last year too, and oil spiked up to $70/bbl come January.

After all, something has to give. Nobody can run thier cars on futures contracts and that's what's getting sold right now.

{edited for spelling}
Last edited by joewp on Thu 16 Nov 2006, 22:43:25, edited 1 time in total.
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Re: wti hammered badly on dec expiration

Unread postby birchm » Thu 16 Nov 2006, 22:05:46

$this->bbcode_second_pass_quote('joewp', '
')I think they want to drop gasoline stocks to zero so they can clean out the storage tanks. Well, that's what this chart looks like!
{Do not quote images as per the COC}


Only because the Y axis doesn't start at zero. Generate those graphs again with a proper axis and tell me how those trends go. We've got a relative glut compared to traditional stockpiles of fuel because of demand destruction and global warming and you try to play it like a doomer. Good job. :roll:
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Re: wti hammered badly on dec expiration

Unread postby joewp » Thu 16 Nov 2006, 22:37:22

$this->bbcode_second_pass_quote('birchm', '')$this->bbcode_second_pass_quote('joewp', '
')I think they want to drop gasoline stocks to zero so they can clean out the storage tanks. Well, that's what this chart looks like!



Only because the Y axis doesn't start at zero. Generate those graphs again with a proper axis and tell me how those trends go. We've got a relative glut compared to traditional stockpiles of fuel because of demand destruction and global warming and you try to play it like a doomer. Good job. :roll:


Relative glut? Demand destruction? The chart shows gasoline stockpiles are less than half of the 5 year average in total barrels, translated into days of use they're even lower. But why listen to me, I'm just a doomer. Listen to the EIA:
$this->bbcode_second_pass_quote('', 'T')otal motor gasoline inventories dropped by 3.7 million barrels last week, and are now in the lower half of the average range. Distillate fuel inventories fell by 3.6 million barrels, and are in the upper half of the average range for this time of year. A very slight increase in high-sulfur distillate fuel (heating oil) inventories was more than compensated by a significant decline in diesel fuel (both ultra-low-sulfur and 15 ppm to 500 ppm sulfur) inventories.
.....
Over the last four weeks, motor gasoline demand has averaged over 9.3 million barrels per day, or 3.1 percent above the same period last year. Distillate fuel demand has averaged nearly 4.5 million barrels per day over the last four weeks, or 9.5 percent above the same period last year. Jet fuel demand is up 4.1 percent over the last four weeks compared to the same four-week period last year.


Some demand destruciton, huh?
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Re: Oil takes pounding on Dec futures expiration

Unread postby AirlinePilot » Thu 16 Nov 2006, 23:31:27

The gasoline demand has surprised me. I'm not sure how folks can come up with the premise that there has been demand destruction. The numbers don't lie. Every year we get the same type of cycles but each year the inventory equates to less and less time until depleted. It's definitely not a cornucopian picture.
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Re: wti hammered badly on dec expiration

Unread postby DantesPeak » Thu 16 Nov 2006, 23:58:25

$this->bbcode_second_pass_quote('birchm', '')$this->bbcode_second_pass_quote('joewp', '
')I think they want to drop gasoline stocks to zero so they can clean out the storage tanks. Well, that's what this chart looks like!


Only because the Y axis doesn't start at zero. Generate those graphs again with a proper axis and tell me how those trends go. We've got a relative glut compared to traditional stockpiles of fuel because of demand destruction and global warming and you try to play it like a doomer. Good job. :roll:


I'm not sure what your point is.

Even though gasoline inventories are about 21 days supply at current rate of use, if those inventories were reduced even by less than 10% (to about 190 million barrels) we would have widespread disruptions in the gasoline delivery system. Most of inventories are needed just to keep the vast national system of storage tanks, pipelines, and local gas stations running smoothly. We are only 10 million barrels above a well functioning level of inventories.

Not shown above, but certain kinds of diesel fuel were in short supply in the Midwest only a week ago.

PS - That blip in gasoline inventory stockpiles a few months ago was caused by foreigners dumping their gasoline inventories - probably because of a change in gasoline standards. Through the year end, businesses will be disposed towards having low inventories because a change in rules and regulations on how gasoline is produced, and because of excise taxes on gasoline. There may be some in the US who will be having some difficulty getting to Grandma's by car this Christmas.
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Re: Oil takes pounding on Dec futures expiration

Unread postby Eli » Fri 17 Nov 2006, 00:04:26

I think this is just one of those situations where we all sit around and say why is oil going so low? It shouldn't be this way.

And then something sets it off and the news changes and oil goes through the roof again.

But overall this why it is not a good idea to trade in commodities.
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Re: Oil takes pounding on Dec futures expiration

Unread postby pup55 » Fri 17 Nov 2006, 09:10:38

$this->bbcode_second_pass_quote('', '2')1 days supply


This is actually a key number.

We checked into this last year around the time of the hurricanes, and people have no idea exactly how lean this system now is, what a staggering amount of gasoline is being transported at a given moment, and how vulnerable the system is to the slightest screw up.

The proverbial "typical gas station" with a given storage capacity and sales volume, has to get a delivery every three or four days in order to keep from experiencing shortages.

So this 21-day supply makes the system potentially really vulnerable to disruption. We found out that the most vulerable places are the towns outside the big metro areas, away from a pipeline terminal, where you have to truck the gas in. Northwest Alabama, for example, experienced shortages last summer when the hurricanes hit.

$this->bbcode_second_pass_quote('', 's')omething sets it off and the news changes and oil goes through the roof again.


We will know soon enough. Thanksgiving week, I would not be at all surprised to see it back over 60 in a day or two. (note: I am not a professional--do not use this for investment purposes. Do not take investment advice from anyone who has a job. Do not believe everything you read on the internet.)
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Re: Oil takes pounding on Dec futures expiration

Unread postby eastbay » Fri 17 Nov 2006, 18:08:45

The December contract is history. January is quoted now at $58.90. Everyone raise your hands up high and say, 'we are saved, halleluja!!'
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