rockdoc123 wrote:At some point this situation can't be sustainable. You would think that there has to be a price at which producers will think of shipping to other markets.
Something I noticed that is interesting is the disconnect between oil and gas company share price and the price of both WTI and Brent but moreso Brent. Since January the two have been strongly diverging with oil company share price levelling off and now falling rapidly whereas oil prices rose continuously and have only just fallen somewhat. A few of the companies I follow have the same share price now as when oil was at $80/bbl. Could be that the investment community has decided to sit on the sidelines for the next few months and hope to see some positive signal in the economic data.
Rock, maybe I'm missing something, but to me, generally, gasoline and oil share prices seem to have correlated better with Brent than with WTI. This makes me think that until Cushing is no longer landlocked (and pipeline locked to a port) that the price of WTI is essentially irrelevant to the GLOBAL oil markets, overall.
Recently someone mentioned how weak the US economy seems to be acting and the likely negative impact on WTI. I agree. I also wonder if the SHORT TERM perception that the dollar may be relatively strong, given the fiasco in Euro-land might also be depressing WTI (along with other commodities prices in US dollars).
What is fascinating to me is:
1). How far some type of divergence like this can run, after it came from basically nowhere. (In Feb, the pundits said it COULDN'T pass $7, then whoops, $12, then whoops, then $15, and MANY said it COULDN'T pass $20. Wrong, wrong, wrong, and (I sense a pattern here) -- wrong!
2). How hard and DANGEROUS it is to try to fade this type of "it MUST return to near parity" trade. Consider that with WTI in contango and often in steep contango, how expensive it was to try to be long WTI and short Brent month by month starting in Feb, when the pundits like idiot Gary Kaminsky on CNBC were raving about how great that trade was. (Gary Kaminsky is a clown without the orange nose and the silly shoes -- who CLAIMS to far outperform passive indexes, though OF COURSE -- he doesn't publish fully audited long term results to prove that...).
(So -- super -- lose monthly on carrying costs AND now many dollars down on the spread to boot. Brilliant. No wonder that "brilliant trader" wears a suit to work and spews idiocy at the camera daily instead of trading for a living).
(Sorry for the rant -- to me such self-serving pundits are just as corrupt as bankers who thrive on fraud and collect large bonuses to boot - all legally, apparently).
(And yes, I see the irony in my personal punditry here - but I don't make a cent off of it, I admit it when I don't know stuff or am guessing, and therefore, IMO, I am exempt from wearing clown shoes and deserving jail time).