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spread btwn cash and far out month 07
Posted: Thu Dec 16, 2004 6:51 pm
by TradingCoach
In regards of crude oil....someone made this statement but I would deduce just the opposite.
"The spread between spot and 07 is $5.00, it was over $10.00 a few months ago. That indicates to me that maybe this down move is a temporary retracement."
fundies what is the deal?
Posted: Thu Dec 16, 2004 10:28 pm
by Jake Carriker
You are correct, conventional wisdom is that a highly backwardated market is more bullish than a contango market (if the market is normal, and not inverted all the time). Crude oil is one that tends to be inverted alot.
Larger degrees of inversion can indicate high demand in the near month or spot market (as happens if there is a shortage of a commodity). Since CL is becoming less inverted (the spread is narrowing) that is not consistent with a shortage.
Jake
Posted: Wed Dec 29, 2004 9:48 pm
by Ghostrider
TC -
I agree with the statement. Spot gets crushed in the near term (no JIT inventory issues), and the dec 07 CL doesn't get as crushed........
There's still a LT play in the distant futures, makes sense to me, lot more uncertainty in the non existant future.
If you want more, check out global CL supply and demand projections going out 10 years. I find a high probability of a shortage.
