Inventories (red line) rose again this week...
The front-month rollover spread is black line. The vertical blue line shows that the spread widening directly coincided with the inventory build...2009 is a hint at the future for discontinuous price "discovery"...
Oil speculators have been propping up the market using the futures, and they've been "rewarded" with massive roll forward losses. The storage glut they sponsored is preventing the market from clearing, and is now pressuring the futures market via higher cost of carry. At some point speculators will step away from guaranteed losses...
As the price of the futures disconnects ever-greater from spot, a price crash along the entire futures curve seems to be the most likely scenario. At some point no one will want to own the expiring contract, creating a no bid market...
Shorting the expiring month and buying the next month, is an arbitrage opportunity that made 5% in one day last month (blue line):
Cumulative Roll forward loss visualized;
The cost of carry is going compound exponential...the current annualized cost is 80% x the price of oil...
The cost of carry is going compound exponential...the current annualized cost is 80% x the price of oil...
Speculators are getting buried:
The cumulative costs of all this chicanery can be viewed in the ETF itself using volume by price, because it absorbs the monthly cost of carry:
The cumulative costs of all this chicanery can be viewed in the ETF itself using volume by price, because it absorbs the monthly cost of carry:
