Crude Oil Futures -- March 28, 2016

Updates

March 29, 2016: for those trying to understand a bit better crude oil futures, a reader provides this information, plus a helpful link (see first comment):

Here's a site that carries price quotes for all the WTI futures contracts out to 2024:
http://www.barchart.com/commodityfutures/Crude_Oil_WTI_Futures/CL 

Drillers use such contracts to lock in the price they'll get next year for oil that they're targetting today. Refineries can likewise guarantee the price they'll pay. Bfor the most part, the futures market functions as a casino for traders in New York and London to bet on the price of oil.

These multiple prices are why it's hard to get a good reading on the Brent/WTI spread, when the price for one that's being quoted is for a different than the other.

Original Post

 

Okay, I know nothing about futures, but I'm trying to learn.

All day, at the Yahoo!Finance website (dynamic link) the price of oil was shown to be down slightly, less than a percent, in the $39 range. Now this evening, the same site shows crude oil to be slightly above $42.

Over at Bloomberg (also a dynamic link) the price at 8:30 p.m. Central Time shows WTI in the same $39 range as reported all day.

So what gives?

I think this is the story. All day over at the Yahoo!Finance site and at the Bloomberg site this evening, "they" are reporting CL1.COM.

On the other hand this evening, Yahoo!Finance is now reporting CLV16.NYM

"CL1" is the futures price for the contract expiring the soonest, which I assume is sometime soon.

On the other hand CLV16 if for crude oil contracts expiring in October, 2016.

For background, this link: https://www.quora.com/What-do-the-abbreviations-in-crude-oil-futures-mean-Eg-CL01-CL02.

So, for those folks, like me, who saw $39 all day, don't all of a sudden get excited and think oil has surged $3/bbl in the last few hours.

In case the link above is broken, from the link:

The listing convention is that the ticker for a contract starts with CL, then has a letter that specifies the month, and then a number that specifies the year.  The letters for the months are:

January (F), February (G), March (H), April (J), May (K), June (M), July (N), August (Q), September (U), October (V), November (X) and December (Z). So, for example, the contract for February 2013 delivery is CLG3.

Information services usually create a composite price that aggregates the historical prices of different futures contracts.  CL1 represents the price of the 1st future (that closest to expiration at any given point in time) subject to certain rules on when they change to the next contract.  CL2 represents the 2nd future at any given time, that is the one following the CL1 future, and so on.

According to RBN Energy:

Physical WTI for prompt delivery (next month) has to be scheduled by the pipeline before the 26^th of the month prior to delivery. To reflect this, CME/NYMEX futures contracts expire 3 business days before the 26^th of the month prior to delivery allowing those taking futures contracts into delivery 3 days to schedule pipeline shipment to Cushing. 

Since the "26th of March" has already passed, perhaps CL1 now refers to three business days before the 26th of April, or, April 23, 2016. I don't know. All I know is that the $39 price seen earlier today and at Bloomberg tonight reflects a futures price near term, whereas the $42 price seen this evening at Yahoo!Finance is the futures contract expiring October, 2016.

At least that's how I read it.

And if in October, 2016, we are still at $42/bbl, there is no way that Saudi is going to see $60 oil for the calendar year 2016.

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Today's Crude Oil Futures

Reuters is reporting:

Oil futures edged lower for a second straight session on Monday in thin trade as European markets observed the Easter holiday and as hedge funds and other big speculators were still hesitant to wager on a two-month long price rebound amid hefty crude inventories.

Sentiment in Brent and U.S. crude's West Texas Intermediate (WTI) futures remained soft with investment banks, such as Barclays and Macquarie, warning that market fundamentals were weak enough to pull prices back to $30 a barrel levels.

"There's just been too much U.S. crude builds lately for the market to ignore," said Tariq Zahir, who is betting WTI for delivery in the near-term will weaken further versus long-term contracts, expanding the market's so-called contango structure. Brent settled down 17 cents at $40.27 a barrel. Reuters data showed trading in the London-based benchmark at just over 73,000 lots versus the 200,000 typical on a regular session.

New York-based WTI finished down 7 cents at $39.39. Both benchmarks are up about 50 percent from 12-year lows hit in mid-February. Despite that advance, weekly data from the U.S. Commodity Futures Trading Commission suggested money managers, including hedge funds, were hesitant to wager all the way on a WTI rally although a few were betting on another price collapse.

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Domestic Life, John Conlee