Commodity Corner
Views on commodities and energy
Oil Market Contango Widening
The spread between front-month oil futures and contracts for later delivery on the New York Mercantile Exchange (see Fig. 1) has widened dramatically this month. (See Fig. 2)The widening contango frequently portends a rise in inventories. For example, in Fig. 3, it can be seen that when the discount for fronth-month crude to second-month crude widened to near $4 a barrel earlier this year, inventories jumped to 19-year highs. The relationship between inventories and the outright futures price can be seen in Fig. 4.
Open Interest in U.S. Crude Oil Futures
Open interest and trading volumes in commodity futures markets have shown some resilience at the start of 2009 despite the dramatic price slides triggered by the economic downturn.
In the fourth quarter of 2008, open interest in U.S. crude oil futures fell to levels not seen since mid-2006 as the global economic crisis hit fuel demand and sent prices tumbling, before rebounding.
this graph raises a question the number of contracts depends on the level of oil prices or on the level of economic activity ?
U.S. Crude Futures Contracts Held By United States Oil Fund in 2008
The United States Oil Fund LP exchange traded fund has built up a large position in crude oil over the past four months, accounting for nearly a quarter of the open interest in the March contract on the NYMEX last week.
Following is a list of the tentative 2009 oil futures contract roll dates for the fund, according to United States Oil Fund’s Website.
Commodities roundup: Oil rally unleashed, how much more left
“Short squeeze, crude expiration — that’s it in a nutshell.”
So says Tom Knight of Truman Arnold in Texas of the near 16% surge in U.S. crude for October to $120.92 a barrel. Among other factors in the energy markets today:
* TARP, the Sec. Paulson-led rescue plan for U.S. banks, has changed sentiment for oil, some analysts are arguing. (A 2% rally in gold amid a weaker dollar lends some support to an re-allocation assumption) * Saudi Arabia trims oil supply to majors * Nigerian rebels declare unilateral cease-fire * U.S. oil sector recovering from Ike
How much more to go? “The dollar is down, the stocks are down and now investulators are jumping back into oil,” says Peter Beutel, analyst at Cameron Hanover in Connecticut. More views on the market today are here.
Doris Frankel informed your readers that ETF shed 114% of its value when the price went from $63.75 to $29.02. Please tell Doris that this is a 54% reduction; there is no such thing as a 114% reduction. If the price went from $63.75 to -0-, the reduction would be 100%.
Commodities Today: Gold rally, gasoline supplies and the politics of speculation
- Gold prices posted their biggest one-day rise in absolute terms since 1980
- As financial worries spread, Russia halted stock and bond trading in a response to the worst market falls since 1998.
- The White House may decide as soon as this afternoon whether to ask members of the International Energy Agency to release emergency gasoline and diesel fuel inventories into the U.S. market, Energy Sec. Sam Bodman tells reporters
- Chinese Premier Wen Jiabao called a meeting of the cabinet to back plans for a national inspection of milk products, the UK Press Association reports.
A news website devoted to American politics picks up the threads in the oil market speculation story. Politico outlines the scope of the lobbying by the airlines-to-truckers backed “Stop Oil Speculation Now Coalition” and its new sparring partner, the Wall Street-backed “Coalition to Protect Competitive Markets”.
Regulation is in the air. Politico notes that gas stations owners have put out signs calling for customers to urge Congress to “take action against speculators”
Commodities Agenda: Ike idles U.S. Gulf energy industry
Oil prices are rising as Hurricane Ike moves within 24 hours of striking the coast near Houston with a possible 20-foot (6-meter) wall of water. A slew of oil refineries located in Galveston Bay that account for around 12 percent of U.S. capacity were also in the storm’s likely path. Weather forecasters at Planalytics saw “major and long-term damage likely at the major refining cities.”
Ike, the federal response and updates of output will set the tone for the day. Here’s a look at output shut in the Gulf and list of oil companies shut and some other events in commodities:
- Senate Energy Committee hold day-long summit to discuss America’s energy problems and solutions.
- Could see big calls for corn/soy after weaker than expected crop and stocks numbers.
- Ed Stoddard and Yereth Rosen probe whether Sarah Palin a friend or foe of big oil. As governor of Alaska, she raised taxes on oil companies. But on drilling, her positions look very like Vice President Dick Cheney.
