Monday, October 21, 2013

Oil: EIA says Crude Supply Rose 4 Million Barrels; Futures Dive Under $100

Front futures $99.41 down $1.40, Brent $109.64 down 30 cents.
From MarketWatch:

Oil below $100; supply up a fourth week in a row
Oil futures dropped below $100 a barrel on Monday after a delayed U.S. government report showed that stockpiles of crude rose more than expected for the week ended Oct. 11, marking a fourth-straight week of rising inventories.

Crude for November delivery CLX3 -1.46%  was last down $1.60, or 1.6%, to $99.23 a barrel on the New York Mercantile Exchange. Prices, which had already slipped below $100 during the electronic trading session, were at about $100.08 before the supply data. They haven’t closed at levels this low since early July, according to FactSet data. 

Brent crude traded on the ICE Futures Exchange, meanwhile, saw more modest losses, with prices for the December contract UK:LCOZ3 -0.26%   down 63 cents, or 0.6%, at $109.31 a barrel....MORE 
We've been targeting Brent $95 and WTI $90 for too long.
Here's today's action via FinViz:
It's hard to decide whether to call this decline stately or majesterial.
Quoting myself from back in August:
The shape of the curve, contango or backwardation doesn't do much to inform directional bets, there are a lot of inputs into what the price, current and future ends up being. There is however a meta-message from the structure: If a market is in backwardation it is telling holders of physical to sell now as the future price is lower. This doesn't tell you where the spot price is going to go, backward markets can go up or down but they do help with another of the three factors of commodities trading profitability, roll yield....
That is very different from what a lot of commodity folks will tell you but hard-won experience says it's true.
Here's the current curve -actually last week's, I'm lazy- it's been backward for a while: