Olney’s commentregarding his last weekend’s comment. NO way, it said very loudly that he’s bullish. Almost very sentence in his comment is bullish. No where in his comment did he ever imply that he was neutral. Hey, no one’s perfect and the least he should do is to admit that he made a mistake, just like I did, for listening to him.
Here, check it out for yourselves.
I think this past weekends summary was misunderstood. I clearly stated that I was neutral in that weekend report. However I think many folks took it that I was bullish on Crude Oil and that I was calling for a bottom. In my posts I try to use as much factual data as possible so that you can formulate your own opinion based on the data. From now on I will use italics when I state my opinion. I will use BOLD when the word or sentence is linked to an article or some other knowledge piece that is important. So when you read the posts, and see italics then you know that they are opinions and should not be followed blindly but rather treated as research that is coupled with your own due dilligence to form your own opinion. If your opinion differs from mine, please use Disqus and provide feedback, sometimes I overlook important items and two heads are always better than one.
And here’s his Weekend Summary Comments
Folks, the Oil Bullz have sharpened their hooves and their horns are back from the repair shop. They are ready to give it another go. The charts have turned ST bullish for Crude Oil and the Oil Bullz. We have almost everything in place a for a rally up to 50. The S&P500 just made a new low on Friday however oil seems to be diverging from that index which we need to keep an eye on. We have a hoard of negative information out there on crude oil, however the oil market is focusing on the positives so lets also focus on the positives for today as we need to respect the recent positive developments.
We have a fundamental improvement improvement in Gasoline demand. This is a quantitative fact based on Government data. 2/25 EIA Supply and Demand Numbers:
Supply - Total motor gasoline inventories decreased by 3.4 million barrels last week, and are in the lower half of the
average range.
Demand - Over the last four weeks, motor gasoline demand has averaged about 9.0 million
barrels per day, up by 1.7 percent from the same period last year.
In addition to the current improvement in gasoline demand that is supporting oil prices we have an an upcoming catalyst for oil prices, with the OPEC meeting on 3/15/09. Over the next couple of weeks we will receive jawboning out of OPEC as they talk up oil prices. No one talks up oil prices better than OPEC, not even my fellow Oklahoman Boone Pickens.
The commercials are reducing their net short position here. They have reduced their net short position 3 weeks in a row. Since October that is the first time we had 3 weeks of short covering in the commercials net short positions (linked).
The covered l 2,277 contracts as of 2/24 (linked).
They covered 19,522 the previous week as of 2/17.
They covered 4375 the week before that as of 2/10.
We have a very interesting situation this week with USO funds roll over. Now the management of the USO are under CFTC scrutiny for last months Feb 6th roll over. You see, the USO rolls over all futures contracts on a preplanned roll over date. Initially I think this was done for transparency as the oil markets are always under the watchful eyes of regulators. The Financial Times wrote an interesting article about this roll over situation last weeks (linked).
So we have a potential arbitrage (arb) opportunity with the USO roll over this Friday(linked). Currently April Crude Oil close at 44.76 Friday, and May Crude Oil close at 46.90. This gives us a spread of 2.14 between the two contracts. One who is looking to take advantage of this situation would implement and arb strategy by simultaneously selling the April Crude Oil contract and buying the May contract. The logic is that the spread will widen with the USO selling April Crude Oil and buying May Crude Oil. Now this arb play is well publicized so folks may front run the May contract in anticipation of USO demand on Friday. The current April holdings on USO, equate to about 1/5 of average daily volume of 250k on April however it is almost 50% of May's 111k volume on Friday. Really in order for this play to work the spread needs to tighten up to less than 1 pnt before it gets attractive on a risk reward basis IMHO. Below are some screen prints of USO holdings and planned roll over dates.