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Re: [RT] All short term projections are failing in CL

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It is not a matter of taking delivery, it is about cost.  If you bought a July 08 oil future in July 07 you paid between $68 and $78 dollars for that future.  Today you need the fuel.  You sell you 08 future for 131 +/- and pay 131 for your crude.  Your actual cost for the crude is what you paid for the July 08 future.  
 
The only time that this has become a problem was in the 70s with silver.  The Hunt brothers had been buying silver futures and the market had risen to over $50 per ounce.  Everyone on the floor was waiting for them to start selling the futures back.  The brothers stated that they weren't going to sell them back and that they were going to take delivery.  In effect the exchange said that they had sold them more silver than there was in the world and that they couldn't take delivery.  If my memory serves me correctly Silver was limit down several days in a row after the exchange said they had to sell the contracts back to them and that they couldn't exercise and take delivery. 
 
A lot of the gold mining companies got into trouble by selling future production when prices were in the $250 to $350 dollar range.  Now with gold trading above $900 they are still delivering gold at the lower price levels.  They may have covered their production costs, but they left a lot of profit on the table and they were a prime force in trying to force gold prices lower.
 
Right now Brazil is tearing down rain forest to plant soybeans.  What happens next?   Maybe the government will stop subsidizing ethanol and grain prices will fall through the floor. Who knows?
 
 
----- Original Message -----
From: grehert
Sent: Saturday, May 24, 2008 1:52 PM
Subject: Re: [RT] All short term projections are failing in CL

I don't know the answer to this line of reasoning, but the Masters testimony implied that Sovereign Wealth Funds, etc., were buying commodity futures unlike any situation in the past.  Now if the Chinese Sovereign Wealth Fund decided to diversify 20% of its assets into oil futures, and the fund is worth 1.3 trillion US Dollars, couldn't this explain the rise in the price of oil -- hoarding or no hoarding, rolling to the next month or not rolling?  And would there be any reason for the Chinese to close their positions as long as the dollar was depreciating?
 
JerryR
----- Original Message -----
From: Mike-pdt
Sent: Saturday, May 24, 2008 3:31 PM
Subject: Re: [RT] All short term projections are failing in CL

Rolling to next month is not taking delivery, how can anyone be hoarding something they don't have.  Future price is speculated, but when the front month closes it's no longer a speculation but a commodity with a value determined by supply and demand.  Or used to be, they say that's changed?

Mike-pdt


At 11:26 AM 5/24/2008, you wrote:
What about just rolling to the next month?
Ira
www.delta100.com
----- Original Message -----
From: mdm27613
To: realtraders@yahoogroups.com
Sent: Saturday, May 24, 2008 7:19 AM
Subject: Re: [RT] All short term projections are failing in CL

I was looking for that, trying to figure out how futures can
determine supply and demand. Speculation controls a futures price,
but come expiration the position must be closed, offset, or there's a
train load of commodity to sell or physically store.

This morning's John Mauldin continues the topic.
http://www.frontlinethoughts.com/pdf/mwo052308.pdf

Mike-pdt

--- In realtraders@yahoogroups.com, "fxapprentice" <fxapprentice@...>
wrote:
>
> Pretty interesting reading:
> http://hsgac.senate.gov/public/_files/052008Masters.pdf
>
> From fundamental standpoint, if US will impose restrictive
legislation
> in this field, we'll see another bubble explosion.
>
> Gold & silver is down from all time highs, EUR is making second
top,
> agriculturals retreated. Oil is the next ? Maybe after CL will get
to
> 147-150.
>
> Michael.
>



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