(crude) oil price discussion thread

Three to twelve million gallons dumped in the Gulf, maybe as high as ten billion dollars in cleanup costs and no new drilling for a while, all will play to higher crude prices.

 

Thanks for pointing that out. I should have said "...in response to rising prices..."

 

Futures are traded by the month. When the next month comes around, the contracts are settled, so sometimes there's a bit of change at the end of month to bring current prices in agreement with the next month's future prices. Next month's prices are what's quoted usually, so it's not too far off.

For instance, right now the Nymex crude price for June is $82.19 (down $4 today), but for November it's $91.20. Dec. 2017 (the last date I can see) it's listed as $98.17, I would think this is a steal. I gotta figure out how I can buy some of that!

 

You can open a futures account at a brokerage. You can manage the account yourself, or pay a broker to manage it for you. I gather that changes in the value of the contract are settled daily, meaning that if you buy Dec 2017 oil futures at $98.17 today, and tomorrow the price falls to $98, you have to pay 17 cents per barrel of your contract. If it goes up to $98.25 the next day, you get 25 cents per barrel. The next day if it drops to $90 you have to pay $8.25, etc. The brokerage will require you to have a certain amount of cash in your account to cover possible losses, and if you lose all you've deposited with them, they'll sell out your contract, unless you deposit more. This is similar to trading on margin and there are probably laws governing the minimum you must have in the account.

You cannot just sign a paper today, then sit back and collect the profit in 2017. You have to tie up enough cash to cover all the losses along the way, and that amount, as I said, will be set by law and possibly by your credit rating with the brokerage as well. And that money could be collecting interest in something like bonds instead.

Futures are very volatile. You can make a lot of money in a short time, or you can lose a lot of money. In effect, you are trading on margin if you do not deposit the full amount of the contract. Trading on margin increases both your potential profit and your risk. Trading without the margin means you are tying up money that's not earning interest.

My recommendation: stay away from futures.

Oh, yes, the standard recommendation is that you only invest PURE RISK CAPITAL in futures. The money you would otherwise put on the craps table in Las Vegas.

 

Trade options on futures.
That way you control a lot more volume with little money.
You can't lose more than you invest.
You won't have a thousand barrels of oil delivered to your front yard.

 

The article seems to suggest that the strengthening dollar is the cause of the recent price "drop".

 

On the subject of gasoline,why or how does ethanol help any thing? I get 4/5 miles less per gallon Could we have a site that tells of stations selling pure gasoline. The citgo station near me ( damascus, va)area stopped recently. I saw one in Mt. City Tn. But that is thirty miles away. I wonder if this info could be made availabe to us all.I would go out of my way to get it. A tanker driver told me that he must replace gaskets monthly in the tank with the ethanol in it.

 

Someone doesn't know how the futures markets work. The index investors buy the most-recently expiring contract ('front month') and as it's about to expire, they 'roll' their contracts to the next month. They do this for two reasons: so their investment matches the commodities index they're following (e.g. Goldman Sachs Commodity Index, GSCI), and so they don't get stuck with having to actually receive the oil they were contracted to. (The financial speculators driving these markets have no interest in actually doing anything with the futures they buy). As a result, the contract tends to dive at the end of each period. The last period ended on Friday.

This 'roll' is actually known as the Goldman Roll in speculation circles. The day traders know it's happening and they base their decisions on it.

As they transition from one front month to the next, there is often quite a discontinuity in the price because it's a different contract.

The site 'Accidental Hunt Brothers' is pretty interesting. Download the reports (click the link in the upper right) and read how Wall Street is affecting the prices of the critical commodities we all depend on.

 

Funny how Diesel fuel is the first byproduct of gasoline manufacturing. Yet it remians higher than premium octane gasoline. They claim it is the additives for the low sulfur chemical enhancements, but construction off road fuel is the same exact stuff and it is way, way cheaper. This is because it is not taxed. The only difference is the dye. Yellow for taxed. Red for off road. Amazing huh? We get ripped off everyday and no one ever does a thing about it. All of the current oil companies should be putting their heads together and help each other solve this oil spill disaster, but no. All they care about is making money. Screw the environment.

 

That's definitely part of it - have you seen how far the Euro has fallen in the past couple of weeks? "pop!"

Another recent influence is the suggestion that the global recovery will be slower than the "irrational exuberance" of the past few months implied.

 

True dat - but you can lose it much, MUCH faster when leveraged / buying on margin.

 

The conventional wisdom is that you invest in futures ONLY high-risk money. I.e., money you're willing to lose; money you'd put on the roulette wheel in Las Vegas.

 

Is it not supply and demand? Imagine how much diesel is actually used compared to petrol/gas? All those trucks, trains and buses running day and night.

Apparantly we export unleaded petrol to the US from here in the UK and Europe as we use much more diesel and unleaded is almost a by-product!

Can't find a link to back this up though.

 

Data I could find suggests the USA imports up to 1 million barrels/day of gasoline during summer months from Europe, South America and Caribbean.

Looks like most of those imports go to the east coast.

 

anyone here buy OIL futures?

 

when oils cheap we should suck the mid-east dry by using our old wells as storage.