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THE Price of Crude pt 13

General discussions of the systemic, societal and civilisational effects of depletion.

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Re: THE Price of Crude pt 13

Unread postby sparky » Tue 21 Feb 2017, 08:10:18

.
@ subjectivist , you are quite right the price of crude has been remarkably stable ,
that's something of a miracle in today's world ,
was it rigged ? has a new balance be found with fracking ?
one could hope so , the gyrations in the quoted price just give me a headache
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Re: THE Price of Crude pt 13

Unread postby Cog » Tue 21 Feb 2017, 08:29:45

WTI oil up today
$54.27
Brent
$57.08
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Re: THE Price of Crude pt 13

Unread postby ROCKMAN » Tue 21 Feb 2017, 08:48:36

Sparky - "that's something of a miracle in today's world ,
was it rigged ?" Actually oil price stability should be the norm. The physical factors (global production rates, drilling activity, etc.) only change significantly very slowly: the oil patch ship turns very slowly. OTOH political factors and other catastrophic events can change OIL FUTURES PRICES significantly in hours. Remember the oil prices tossed about here are typically not the price of physical oil being bought but prices being bid for oil future contracts that day.

There is some relationship between futures prices and the price the Rockman gets when he sells his physical oil. But it's not a direct relationship and, more important: the price I get if I sell oil this week IS NOT RELATED AT ALL to the oil futures prices today you are referring to.
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Re: THE Price of Crude pt 13

Unread postby GoghGoner » Wed 22 Feb 2017, 20:29:27

First bullish report since December, we will see if EIA backs it up tomorrow. This could be the start of a big movement up in price.

U.S. oil rises after report shows drop in stockpiles

Crude inventories fell by 884,000 barrels in the week to Feb. 17 to 512.7 million, compared with analysts' expectations for an increase of 3.5 million barrels, data from industry group the American Petroleum Institute showed on Wednesday.

Crude stocks at the Cushing, Oklahoma, delivery hub were down by 1.7 million barrels and U.S. crude imports fell last week by 1.5 million barrels per day (bpd) to 7.398 million bpd, according to the API.
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Re: THE Price of Crude pt 13

Unread postby Subjectivist » Thu 23 Feb 2017, 14:26:46

The EIA reports that the average WTI price for 2016 was $43.33/bbl. today the 52 week moving average is already up about six dollars over that. If prices just stayed where they are the rest of this year the average for 2017 would be ten bucks a barrel higher than 2016 and about five bucks higher than 2015.
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Re: THE Price of Crude pt 13

Unread postby GoghGoner » Fri 03 Mar 2017, 16:59:50

Even with a neutral-bearish EIA report, I am still waiting for oil to break out to the upside. I do think that the 20% increase in the price of gasoline has muted Mexican demand. If I am on the right track the EIA will have to make major adjustments to their numbers but the end result is the same. Globally oil demand seems to be strong with revisions in demand predictions showing an upward trend.

See how this plays out in Libya the next few days.

Libya's Biggest Oil Port Seized in Blow to Production Surge
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Re: THE Price of Crude pt 13

Unread postby Subjectivist » Wed 08 Mar 2017, 18:49:23

I just don't get the way the oil market works. The EIA report today shows a drop in over all inventory drop and a big gasolinestockpile draw, but the price dropped like a rock for some reason I can't figure out.
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Re: THE Price of Crude pt 13

Unread postby onlooker » Wed 08 Mar 2017, 18:54:34

Subjectivist wrote:I just don't get the way the oil market works. The EIA report today shows a drop in over all inventory drop and a big gasolinestockpile draw, but the price dropped like a rock for some reason I can't figure out.

Maybe its time you revisit ETP. The model foresees prices continuously dropping
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Re: THE Price of Crude pt 13

Unread postby rockdoc123 » Wed 08 Mar 2017, 21:32:44

I just don't get the way the oil market works. The EIA report today shows a drop in over all inventory drop and a big gasolinestockpile draw, but the price dropped like a rock for some reason I can't figure out.


http://www.cnbc.com/2017/03/08/speculators-got-crushed-while-oil-industry-may-have-learned-lesson-and-is-more-cautious-on-prices.html

Oil fell Wednesday after U.S. government data showed another build of 8.2 million barrels, and U.S. production continued to creep higher to 9.1 million barrels a day.

"We aren't really planning for an oil price much different than this," said Al Walker, CEO of Anadarko Petroleum, attending the annual CERAWeek by IHS Markit conference in Houston. He said he has been expecting volatility and has not been planning for a much higher price. West Texas fell to just above $50 per barrel and Brent was about $53 per barrel Wednesday.

Walker's comments echoed those of other chief executives at the conference, including ConocoPhillips CEO Ryan Lance who discussed keeping costs down amid expectations for a low price environment. BP Group Chief Executive Robert Dudley said he's planning for "lower for longer prices" in the $55 to $60 per barrel range for the next five years. Dudley said he does not see the price dropping much lower than current levels, and he said Tuesday that he expects the agreement between OPEC and non OPEC producers to help support prices.
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Re: THE Price of Crude pt 13

Unread postby ROCKMAN » Wed 08 Mar 2017, 22:37:20

Sub - "...but the price dropped like a rock for some reason I can't figure out.". The price the Rockman sells his oil for this month will not be related to the decrease in the price bid for OIL FUTURES you're referring to. I'll sell oil this month based on the long term sales contract that partially uses past oil future contracts in that calculation. Also understand that virtually all the oil that is delivered from storage is not being bought from producers by the refineries at that price. The price we producers sell our oil for is called the "first purchase price"...FPP. That oil from storage is largely made on blended oil being sold to refineries from third party purchasers and to a lesser extent or oil owned by speculators. And those prices differ from the FPP. But typically the speculators sell their oil (and not at the FPP) to blenders who still hold that oil in storage.

Here's some homework for you: you can read the closing price for the WTI future contracts today and every day since the first of the month (hint: that's not at the FPP). You can also read the change in the amount of oil in storage since the first of the month. Of course oil is constantly being added and removed from storage. So first part of your pop quiz: how much oil has been bought by the refineries since the first of the month? And for bonus points: what was the average price those refineries paid for that oil? Another hint: the refineries aren't paying the FPP. In fact, they have no idea what the FPP was 0f the different crudes used to make the blended oil they are buying.
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Re: THE Price of Crude pt 13

Unread postby tita » Thu 09 Mar 2017, 04:28:06

I agree with sub, I don't understand why the "Future Market" (WTI for convenience) dropped that much yesterday. Of course, refineries and producer don't exchange their oil on the future market, but on the physical market... which price is well explained by rockman.

But the physical change (inventories) is the information used by brokers to bet on the WTI. Yes, the build in crude oil is high, but it is expected to build at this time of the year (maintenance, low demand). We can look at the difference with last year inventories of crude oil to know how bad it is. Since the beginning of the year, it was between 20mb and 45mb. Yesterday? 37mb, which is not the worse we have seen.
And what about the total stocks difference with last year? This include gasoline and distillate, so indicate how the demand is going on. Well, the difference is 32mb, which is the lowest since the beginning of the year. Using the variation of this difference, the demand/offer is easing, not worsening. So why do brokers bet on lower prices? Who knows? They are betting, they do what they want.
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Re: THE Price of Crude pt 13

Unread postby GoghGoner » Thu 09 Mar 2017, 06:52:44

WTI down to $49. Finally broke the tight range but not the direction I was guessing with fighting in Libya and some trouble with Iraq's exports to Turkey. I view the futures price as being b/w 47-57 right now. It it goes below 47 I will have to adjust my range and my opinion about the fundamentals. There is weakness in the broader commodity markets so oil isn't making this move independently. The EIA report was neutral in my opinion and the market hasn't been paying too much attention to it this year. Overall the EIA weekly numbers are in a bearish trend and the talk coming out of OPEC about the effects of the cuts on prices has been bearish. The market was heavy with speculative longs and the herd just got thinned hard.

Is this just some normal volatility or are we back in commodity deflation? Beginning to wonder if consumers can't afford higher prices.
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Re: THE Price of Crude pt 13

Unread postby ROCKMAN » Thu 09 Mar 2017, 11:39:24

tita - I don't like to be redundant. But again the price you and sub are trying to relate to storage movements isn't determined by storage changes or any other physical component. That price per bbl is based solely on the expectations of the futures buyer based on their expectation of futures bids in the next 30 days. So that "price" of oil isn't even based upon the prediction of oil prices when the contracts mature but what investors will be bidding for NEW future contracts at that time. And let's not forget: that for every contracts buyer predicting oil will be sell for more then their bid of $X/bbl another investors is gambling the exact same amount of money on oil selling for less the $X/bbl when the contract expires. So again: the monies made or lost by oil future investors is not a function of storage changes or even the actual price paid for physical oil: it's determine SOLELY by how much future contracts are selling for when the existing contracts expires.

You and sub are trying to relate how many apples are hanging in the trees in an orchard to the price of oranges at you grocery store. LOL.
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Re: THE Price of Crude pt 13

Unread postby rockdoc123 » Thu 09 Mar 2017, 12:24:28

You and sub are trying to relate how many apples are hanging in the trees in an orchard to the price of oranges at you grocery store. LOL


I don't think so. What is happening in the current market (i.e. builds in inventories, increased production in the US, wars in producing nations etc) is the main contributor to the view that market analysts take for the future price of oil. Ceraweek was rife with views from CEO's of all the majors regarding their views on where oil will settle over the next few years. Those views are what shapes the investment houses portfolio analysis at any given time and the traders react to that news. Now you could argue the traders don't really know what is going to happen in the future as really nobody does but their actions are driven by a view on certain bets to a large extent. If you have ever had the opportunity to visit one of the major exchanges and view the trading floor it is quite interesting. All it takes is for one or two firms with large holdings in a particular commodity to swing trading to either rapid selling or buying by their actions. When you see big shifts like the last two days it is really the herd mentality catching up rather than any sea change in what is happening in the market. The views traders take on future prices are almost always wrong, that is why they hedge those bets all the time. But the actions they take are to a large extent driven by current events.

There are also many things happening with respect to oil and gas trades that can have short term impacts on price. Obviously group sentiment is a major factor but also certain trading houses may have overextended themselves in the recent run up in prices...over exuberance resulting in them ending up with a portfolio slightly overweighted to the risker end of holdings than their plan intended. That can result in those groups taking opportunities to unwind long positions and take up additional short positions. You also have to remember that the folks trading aren't necessarily all large brained individuals. There is a tendency to think they are when you watch the various interviews on Bloomberg without realizing they are interviewing the 1% of analysts who actually have a lot of credibility. There are far more of them who are "seat of the pants" traders.
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Re: THE Price of Crude pt 13

Unread postby Tanada » Thu 09 Mar 2017, 13:23:42

Here is what I see. WTI contract trades end at 7 PM Eastern Time USA every evening and reopen in overseas markets at midnight Eastern Time USA. Just before closing on March 7 the contract price was $52.88, then right at closing there was a contract sold for $50.38/bbl that stayed the official price from 7:00:01 pm until 00:00:01 when a contract was sold for $52.79 in the overseas market. Prices then held in the $52+/bbl range until noon on March 8 when someone started selling off again driving prices back down to the $50.30/bbl range by 7 PM once again. This time when overseas markets opened at midnight they held in the $50.30 range for five hours, then at 5:00:00 someone sold off at $49.20 which set off another spate of selling so that as of 1:00:00 prices are bouncing around $48.80/bbl

Now I can't say for sure, but it sure looks like someone is making a concerted effort to drive prices down. Perhaps someone has a bunch of contracts about to come due that would cost them a bundle at 50+/bbl. It wouldn't be the first time a huge investment group like Goldman Sacks used knowledge of how the trading software functions to manipulate things short term, the thing is fundamentals always reassert themselves after not too long of a time. If prices remain lower for a month you have a trend, if it is just a few days or a week you have a 'herd following' problem.
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Re: THE Price of Crude pt 13

Unread postby ROCKMAN » Thu 09 Mar 2017, 16:48:10

Doc - "What is happening in the current market (i.e. builds in inventories, increased production in the US, wars in producing nations etc) is the main contributor to the view that market analysts take for the future price of oil." OK then: please explain how the inventory change sub mentioned affected the price physical oil sells for this week. Understand that's the current conversation. Or, if I misunderstood sub: how is the inventory change this week going to effect the closing price of future contracts bought this week.

And again to be clear: my comment had nothing to do with what any analyst might be predicting for future oil prices. The discussion is about what's causing the bids for oil futures contracts to vary. IOW sub wondered why futures bid moved in a direction that appeared opposite of what he would expect from the change in inventory this week...right sub?

T - "...but it sure looks like someone is making a concerted effort to drive prices down." I don't follow what you mean about "driving prices down". The futures bids are set by the investors buying those contracts. No one can force anyone to bid any price other then what those investors want to wager. Am I wrong but it sounds like you're taking about driving the price down for physical oil purchases?
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Re: THE Price of Crude pt 13

Unread postby rockdoc123 » Thu 09 Mar 2017, 21:02:08

Doc - "What is happening in the current market (i.e. builds in inventories, increased production in the US, wars in producing nations etc) is the main contributor to the view that market analysts take for the future price of oil." OK then: please explain how the inventory change sub mentioned affected the price physical oil sells for this week. Understand that's the current conversation. Or, if I misunderstood sub: how is the inventory change this week going to effect the closing price of future contracts bought this week.


whether we are talking about the futures market or the physical/spot market what affects the price is sentiment. As I pointed out the Bloomberg article noted another large build in US inventories and higher US production along with statements from various pundits at CERAweek suggesting prices were not set to rise rapidly anytime soon. For a sell side trader it suggests in order to maximize profits with oil he doesn't want to hold onto he should sell now, if there are more sellers than buyers the price drops until such time as buyers are happy to pick up what they can as they believe the price will rise tomorrow. The bets on the futures markets whether they are 30, 60 or 90 days delivery are risk weightings of the perception at the time. A trader knowing that there has been continual builds for the last few weeks and increasing production is likely to view future prices as being at risk to go lower. That being said there are other pressures that can come into play such as contango. My assumption was the price movement made sense given the Bloomberg analysis.
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Re: THE Price of Crude pt 13

Unread postby sparky » Thu 23 Mar 2017, 23:59:54

.
Oh well , just to show
after enthusing last page on the stability of prices , Baamm !

the price curve was very nice rising steadily and tapering around a level between 50 ~55 $b
it made so much sense , was crude oil becoming boring ?

did the worldwide price of extraction dropped of 10 bucks per gallon in 3 days ?
did on zillion new fracking wells came on line ?
it seems like speculation has risen its ugly head again ,
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Re: THE Price of Crude pt 13

Unread postby GoghGoner » Fri 24 Mar 2017, 08:16:28

Still holding above my lower bound of $47 so all within normal volatility and nothing fundamentally has changed since January. The global economy seems to be chugging right along so I expect rising demand/price inflation with supply stagnant.
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Re: THE Price of Crude pt 13

Unread postby ROCKMAN » Sat 01 Apr 2017, 12:00:34

Since the Rockman just rambled on about oil futures elsewhere perhaps it's worth reminding forks about its history. Notice the volatility starting around 2004. Notice that it can't be simply explained by the oil price booms and crashes: had those, like oil going to $17/bbl in 1998, in the past. Here's the chart of US oil futures:

https://www.eia.gov/dnav/pet/hist/LeafH ... =rclc1&f=m

But when and why were they created? Here's one view:

The History of Oil Futures Trading in the US - Oil futures represent a way oil suppliers can hedge risk in an uncertain market – and a way oil speculators can turn a profit. The trading of oil futures in the U.S. is an interesting history, one from which present-day investors and traders can learn a good bit. It never hurts to know how a certain practice has evolved, especially one involving such a crucial commodity.

The First Oil Futures Contract is Sold - Crude oil futures, as we know them, were first sold in New York on March 30, 1983. Before then, players in the industry attempted to control the price of oil, more or less, in the United States. The price of oil didn’t really get out of hand until the Yom Kippur War in 1973 and the ensuing embargo from OPEC, the Middle Eastern oil cartel that sought to punish Israel and its supporters in the West. Prices dipped from 1975 to about 1978 before spiking again with the overthrow of the Shah in Iran in 1979, the beginning of the Iran-Iraq War, and the rise of Ayatollah Khomeini.

Prices took a tumble from 1983 onward. At this time, the first futures contracts were traded on the New York Mercantile Exchange (NYMEX). These oil contracts were based on the West Texas Intermediate (WTI) price benchmark, as they are today. Partially because of this development, oil prices continued to fall until they bottomed in 1988. They would not significantly rise again until forced to do so by the invasion of Kuwait by Iraq in 1990. Since Desert Storm in 1991, oil prices have risen dramatically, peaking at $145 in July, 2008. As of September 10, 2012, the price of one barrel of oil is $96.21.

Impact of Futures on Price - What impact, if any, has the emergence of oil futures had on the price of oil? It is reasonable to state that the emergence of oil futures has had a stabilizing effect, more or less, on the price of oil. While it’s true that oil has skyrocketed since the late 1980’s, it is also true that the world has grown significantly – which means increased consumption – and supply has struggled to keep up. So it’s easy to see how natural limitations on supply and increased demand can explain most of the rise in price of oil. When looking at the situation from that perspective, the presence of oil futures has allowed oil suppliers to hedge against the market and to protect themselves somewhat from volatility.

The Future of the Oil Market - While no one can predict the future of the oil market with 100% accuracy, there are a few possible and probable trends involving oil futures.

The rest if interested. Note: this was written by a broker that makes a living from folks buying securities like oil futures:

http://www.wisestockbuyer.com/the-histo ... in-the-us/
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