Kolibri Global Energy Inc BNKPF

RE:RE:us wti curve

[Carbonbull]

Broker G,

There are many factors that cause backwardation , the most important one was the elimination of speculative capacity in the physical swap market , where once mighty balance sheets played now only strategic balance sheets play , less capital to support a speculative view is the number one reason. 

The major player in the world is now BP trading tear apart the finacial statements and you will be amazed at the profit this internal group makes as they support the debt providers in the US on physical swaps. the credit fee itself on non investment grade issuers exceeds  75 cents a barrel.

The old supply / dmand agreement thesis has to take into account the available credit and counterparty risk to execute such a trade . the monte carlo simulation for credit risk on a 3000 barrel a day physical  3 year swap (B credit) requires 25 million dollars in senior secured credit to be available. 

Because credit is scarce in this market they alleviate risk thru backwardation , thus sliding upthe forward curve is a favorite hedge fund tatic , When this phenomenom breaks we will truly have a bull market in oil and PUD reserves will regain their luster , until ten the best trade is a physical long front end and short back end trade , the front end being defined as front twelve months, its how the big boys play , until they don't.