Wrap – Week Ended 030714


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1) Oil Watch: Oil front month and 12 month strip at new highs (again and again and again). The numbers in the table above kind of say it all. I've resisted the temptation to add the eurodollar to the table  but trust me when I say it's responsibility in the recent crude rally is overstated. This rally has defied OPEC and ignored somewhat weaker fundamentals (or at least shifted its focus away from the U.S. towards India and China). I think the move is overdone, but it could easily go to $120 as capital hides in the commodities. 

2) Natural Gas Speculators Get Shorty-er. If somebody has a better term for a short squeeze where the shorts continually replenish and in fact increase the size of the short position please let me know. Until then, I'm coining the phrase "self-recharging cover up squeeze rally" or for short, a "client #9 rally".


3) If the move in crude this year has defied rationale thinking, the jump in natural gas prices has bordered on lunacy. To see all the graphs that matter regarding storage check out the Thursday Night Gas Storage Review page here.   

Looks at (WRES) and (EVEP) will be in the Monday post.

Holdings Watch: Slow week for closed trades (Thanks a lot Bear Streans!):

  • SU March $105 Calls closed for $3.10, up 72%.
  • APC March $65 Calls closed for $1.70 after a trading mistake, resulting in a 2 hour 42% gain.   

Have a great rest of your weekend! 


7 Responses to “Wrap – Week Ended 030714”

  1. 1

    Is it OK to start buying DUG positions, to double short the USO?

    aka, is it going to top this week and fall to $100/bbl?

    Yes, I see that last graph. A contrarian would buy long. BUT, there’s no reason for
    oil to stay this high! (right?) Historically speaking we’re over-reacting. (right?)
    April expiry should be safe to short. (right?)

    Boy those DUG calls will be cheap on Wed. evening if Thursday or Friday give an oil drop.

    [those are pretty thinly traded, I don’t want to be left holding the bag on expiry]

  2. 2
    coco Says:

    I have been confused about the CFTC report. How relavant is it given the emergance of exhcanges such as ICE (which to my knowledge don’t publish a report like the CFTC and are gaining more and more market share.) Does anyone have a thought on this?

  3. 3
    zman Says:


    – Re DUG and Oil. I still prefer a more targeted course to short oil than DUG. I would suppose DUG contains a lot of names which are in the midst of seeing some really nice upwards earnings momentum. SU will/should track it more closely.

    What’s in DUG? Here’s a link with no names? Hard to make a play w/o knowing what’s in it or how it is weighted.


    I found one place that said it had 6.37% of djusn swaps? hmmmm.

    As to timing. April oil expires Friday. The last few expirations have been witness to a rally into expiry. So maybe 115 or even 120 before it breaks. Really just a guessing game there.

    There is little reason (aside from speculators buying more of it) that oil should be this high, true. OPEC, EIA, IEA all see falling demand in 2Q and flat to very little YoY for 2008. If the economy worsens we could see a slight drop here and globally. So should it stay up here, no. Like natural gas, there have been some very sizable profits made in a very short time. They won’t want to lose them. I think technicals on the charts matter a lot more right now than usual so I’d wait on a short for them to break.

  4. 4
    zman Says:

    Coco – I just looked over the ICE website again for anything relevant to gas. Other than the day forward trade info they don’t give much. I don’t know if the CFTC counts ICE data or not as it is supposed to catch trades in NYMEX contracts. I know ICE trades some NYMEX and CTFC is a government not a NYMEX org so are they not still catching the majority of them. Will make a phone call this week and do a little DD to see if I can answer this as it bugs me too. One thing is certain is that people are short more than ever before and NYMEX longs are near their highs as well. Lots of funny money new to the gas arena, imagine it too will not like losing such quick, easy profits and will run like the wind for the exits if NG charts break (which they came close to doing on Friday).

    Tonight gas is up $0.20 to 10.06 on volume of 420 contracts as the games continue.

  5. 5
    zman Says:

    Fed Emergency 25 bps rate cut.

    Bear taken under for $2 per share

    S&P500 futures down 2.55% (-33) at 1260

    oil up $0.84 to 111.05

    tomorrow is going to stink.

  6. 6
    kaman Says:

    Z- The year is still young, but you may have just taken the prize for understatement…Fed meets this week, GS reports, options expiration on a market holiday. Signs of the apocalypse. As my favorite pastor used to say, “sometimes you just gotta hang on til the ride is over”.

  7. 7
    scoop006 Says:

    I nominate Sambone for TRADER OF THE YEAR for his bearish calls on the financials.

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