Tuesday, January 20, 2009

Spot Life CL Feb 09 (Entire)

Below you'll find the reported causes table for the last seven days that CL Feb 09 was traded and reported in the press as the price of oil. There was a lot of troubling news, from the Russo-Ukraine dispute to Gaza and an Arab summit which could have resulted in another embargo--though President Ahmadinejad praised the idea as meritorious, but was sure to say it wasn't in the works. Plus a few new refineries are set to come online, nearly 2 million b/d of new capacity in 2009. ... and China lets the world know it has started filling various SPRs and the USDOE announces it will begin come February.

But the economy was miserable. Downing Street announced another bank bailout program. Leading OECD indicators showed that the economies of China and Germany were disintegrating faster than the rest of the developed and developing world. OPEC, the EIA and the IEA all downgraded their estimates of global demand and all estimate that demand will fall in 2009--the first time global demand has been expected to shrink in years. Key Chinese economic officials indicate that things are indeed bad. Taiwanese and South Korean exports shrink by as much as 50%! Various stimulus plans are announced, but there is the suspicion that most of them are talk or designed to shore up comparative advantage so as to export out of the mess, and thus likely to create trade frictions.

And then there is the still not nipped in the bud giant contango of 2008 ... they say that the tanks are full bringing 8% of the world's VLCC fleet off market as they are chartered for storage. But stocks have been higher in the last five years ... so what's going on?

The giant contango of 2008 is still fearsome. It looks like it has narrowed some in the last two days, but most of what you see in the graph below is just technical due to the expiry--meaning that the bottom most line simply disappears tomorrow. The differential between Feb and Mar 09 closed today at -$2.10/b, but between Mar 09 (which becomes front month tomorrow) and Apr 09 the differential is -$3.41/b, much more, but still less than what we've seen during the spot life of this contract of -$8.14/b on January 15! The differential between Feb and Jun 09 closed at -9.54/b and between Feb 09 and Feb 09 at -$16.97/b or 48.3% of the front month price.

Here it plausibly does look like oil is following the euro, which is a reverse of the trend for some time now, but there you have it. During the course of its spot life, CL Feb 09 lost 2.93% of its value. From December 20 - January 20, the Euro lost 6.1% of its value against the dollar (at interbank rates.)

Near the end of CL Feb 09's spot life, gasoline (RBOB) Feb 09 futures began to recover, but still do not indicate that a topper refinery would be able to make any money from making gasoline from sweet light crude. Natural gas (NG) Feb 09, which nearly traded at Btu parity with crude on Christmas, lost some of its luster. Diesel still makes the killing.

The last two CFTC commitment of traders reports are still bullish, given that commercials are hedging against a fall in price and non commercials are betting that they will rise. Percentage of traders net short or long still historically unusually high.

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