This page has been archived and commenting is disabled.
The USO "Carnage" Has Only Just Begun
10 days we warned "the sharp slide in crude prices may be leading the proverbial sheep to slaughter," as we noted ther surge in Oil ETF USO's shares outstanding and the spike in Oil price contango - a potentially ugly combination for an ETF ahead of the roll. Since then, USO has indeed tumbled over 14%. However, it;s not over yet - in the last 3 days alone, the USO share count has soared 10% (the fastest pace in 2 months) almost at its Feb 2009 record highs as investors "know" the bottom is in now and continue to catch the gapping-lower-every-day, massively contango'd, ETF knife...
Carnage... (note the increaisng fequency of gap opens)
As the share count continues to soar...
We suspect a lot of the ETF creation is sell-side firms picthiung structured notes liened against USO... with principal impairments coming soon...
Charts: Bloomberg
»
- 26766 reads
- Printer-friendly version
- Send to friend
- advertisements -
BULLISH
Yellen those are some pretty big cracks in your dyke.
How do you know her dyke?
Feb 2009 record highs were the lows and after that it ran up to $110.... nothing like using your own argument to contradict yourself.... sure it can piss lower... but we're talking about deep pockets..... can we go below $30 for long ? unlikely.... Oil at $30 will be like OJ at .45 cents in 2004.. if it went any lower, they literally saw down the orange trees to save water...... at $20... they will close close the wells it won't pay.....
It's not the price but the buy-in. Certain assumptions are being made based on 'expert' advice which is saying the bottom is in and it's time to make money, so place your bets. Unfortunately, we aren't near bottom and instead of a roll downhill the speculators are going to push it off the cliff. Yellen will need an emergency QE to prevent a market collapse but that might not work.
If it were a free market, y'all are correct in the assumptions made about how low it can go and where it can't go. But, commod's are being used as weapons of financial war. The money men are panicking and oil could go to $5, gold to $250, and silver to $3. As the cancer patient dies, anything can and will happen. There are no market fundamentals currently, so "where it will bottom" is a pointless endeavour.
While all you said is true, I believe there will come a time when oil, gold, silver, and orange juice will sell for many times what it is today. When is that...? Well, that's the rub, isn't it?
As they say, timing is everything. (so far, mine sucks)
Agreed.
Once you pull the pin, mister grenade is no longer your friend.....
I don't think you understand that the world eCONomy is collapsing...
exactly
feb 2009 was pretty much the bottom of recession (that started december 2007)
we're just entering one now .... plenty of room to move lower
May be. But don't forget that people need to eat and drink and transportation is a massive part of oil demand.
And I don't believe in the mad max theories most people here believe so a rebound is only a matter of time.
My timeframe was 2 years 2 months ago and I'm sticking to it.
I'm not avereging down every week but if oil where to go down to 35, I'd buy more.
In the end, all you need to know is that the poor people will get fucked.
And that means all the cheap stuff will get expensive.
Oil is a basic so it will be on that list.
And as investments have shut down, supply will start to crash down in the next 6 to 12 months.
So now you're cheering about a crash and soon you'll be crying about supply when the price bursts through the roof.
I agree.
I agree with what he said.
The fracking companies are heavily leveraged, if they dont pump and sell, they cant pay the bills. Of course if storage runs out, there wont be any buyers. Most are stuck, they either pump or default.
i follow the EIA reports
production still at year ago levels ... what has changed is make up ... import crude down while domestic crude up
also many leases are based on royalty off production ... if production shuts down very long then leases are void (and most favor producer over landholder) ... NO ONE seems too interested in cutting production in face of slumping demand
Yes - This. Someone is finally seeing past the complexities of futures, contango, number of wells, etc and finally stating the obvious:
Frackers, particularly micro and mid-size, are leveraged balls deep with HY debt running 8%+ and simply cannot scale back. Fact is, they're ramping up production to stay just one step ahead of the jaws of a mighty default machine known as Junk Debt.....
Good luck with your debt service, assholes....
feb 2009 was post US stock crash. currently, US stocks are still 3X higher than feb 09. WHEN stocks crater (and, they will), oil and oil etfs will be destroyed even further. $40 oil isnt cheap. the bankers just made you think it was because they pumped it up so high.
not if the $ craters as well. 'usually' strong $ has meant weak stocks; several months now, its inverted. no reason we can t see $ delcine along with stocks for a few months and see /cl catch a bid and "rocket" to $55, 12 higher than current prices....i'd be content with a 25%+ trade.
short sellinnng !
Another muppet alert from Zero Hedge. Too many fire alarms going off at the same time. Which one to act on?
lower gas prices will be good for the economy!! lol
What is this economy you speak of?
Not sure if you noticed, but gas prices aren't dropping this time.
It's called a peace dividend by the ziocons.
Do you not have an editor? Learn to use spell check.
Does FIGHT CLUB need an editor?
picthiung
Nice. Like Bob Uecker said in 'Major League': JUUUUST a bit outside.
You want to know my prediction?........ PAIN!
https://youtu.be/lSPNQ82Sq4E
50 shades of Fed.....
This should not be a problem. Last time USO traded at the current prices was, well, never...
That's right just keep buying all the way down. They call it averaging. Knife catching & slaughter sounds so harsh!
BTFD! WIN!WIN!
The phrase, Chasing the dragon comes to mind.
COP slashed capX by 1/3 this morning. gee, didn't see that coming with oil dropping 60% since the summer.
love these fucking idiots parading onto CNBC saying "100% a positive the drop in oil". sorry, wrong. yes lo oil prices are GREAT for the middle class but its 1. how you get there 2. the velocity of how you get there 3. how low you go from how high you were 4. how long do you stay there.
with the USD ripping peoples faces off (and unless the fed starts outright selling dollars that don't exist or embark on QE4 until they've bot ALL the treasuries + ones that don't exist so we can take our own rates negative), i have no idea why people think this USD is going lower in the short-term. you have a GLUT of U.S, companies that are so fucking behind the 8-ball right now in-terms of currency exposure, just watch the next 2 quarters earnings reports; these guys are all gonna scramble to buy more USD, driving it higher as the europeans, chinese, and japanese continue to print like crazy.
price in oil hasn't move 1/2 as much because of supply/demand as it has because of the rise in the USD; just lay a chart of oil over the U.S. dollar back to the summer - its pretty simple shit.
as for the supply/demand story, i always thought it was a weak demand story. now throw in that we might get this iran deal which will alllow them to sell and additional million barrels to an already overcrowded market, OPEC is not cutting anything, this shell-game with rig count (reducing UNPRODUCTIVE rigs yet squeezing more juice out of the more productive ones, adding to supply), and the fact that we now are over-stuffing our pipes here in the states + tankers floating all over each friggin body of water - i have no idea how any lift in oil is not faded.
So far gasoline remains bid.
Tesla is a huge car company now though...and energy company too. Expensive...not so true with KNDI though.
Douglas Coupland
"its pretty simple shit"
usd 1 yr chart
http://finviz.com/futures_charts.ashx?t=DX&p=d1
oil 1 yr chart
http://finviz.com/futures_charts.ashx?t=CL&p=d1
Why do you think oil prices are low right now?
Spot on. Faulty product...should be delisted immediately. Thing is a scam and has nothing to do with actual oil. Great job SEC! You folks are real winners!
"America: Where money goes to die."
oh, also just keep an eye on high-yield (HYG) - north or south of 90.00 is the bogey. longer we stay below it (and lower we go), the harder these guys that bot all this debt are getting boned. puke-fest to begin at somepoint with oil submerged below-50. can't wait til we get a 30-handle on oil. should be some really chunky vomit in the high-yield market as this year marches on.
We may run out of storage before they can finish paying the bills. Just imagine if suddenly no buyers......
http://www.marketwatch.com/story/secret-service-wants-8-million-for-a-fa...
WTF?"
What wrong with the old fake white house
Let's put Obama in the fake White House and put a real president in the real White House..
In my country gas costs 1,48 dollars per one litre. I think it's cheap.
Latest ZH Ad.....11 CHEAP CARS YOU CAN BUY TO MAKE PEOPLE THINK YOU ARE RICH. LMFAO
#1 CAR THAT YOU CAN BUY THAT WILL MAKE PEOPLE THINK YOU ARE STUPID--------> VOLT
Forget that USO thing. Wait for Exxon to stabilize then buy Exxon. It's a huge oil company that isn't going to die any time soon.
Lots of gaps to fill, long and strong, baby!
POOR HOMEOWNER REFUSES OIL DRILLING IN HIS YARD DUE TO LOW OIL PRICES
"I can make more money working for McDonalds in Liberia".
Source: www.financialpaparazzi.com
With the degree of futures contango we have, USO is going to cost holders ~10% a month or so due to the baked in carry.
You could lose all your money even if oil goes up in price.
Best to sell out of the money puts or wait until the carry structure flattens out and consider back month futures if you're bullish on oil.
When the fed lost it's darling Petro-dollar, they foolishly responded by letting the value of oil plummet, in a *If we can't have it, nobody can* strategy. ...Well, both axles on that tractor were already buried up to the hubs, and then instead of taking precaution, they put the damned thing in road gear and let r buck. All we can see from here is a tiny bit of the cab peeking out across horizon.
when our petro dollar was threatened in times past, Dikkk Cheney would call up BP and order them to blow up an aging refinery in Texas and collect the insurance. BP, always eager to please would bake a crater so large you could bury all the dead texans in it and they would roll around like a bb in a box car.
Oh, those were the days....instead of yelling "FOUR" like a respectable golfer, they would yell "Shortage" and by dawn the next day, gas at the pumps was sitting at a nifty $4 fifty!!
too funny...Western banks are now financializing the oil sector...they need a deep contango below $40 barrel to make it profitable for VLCC storage...they will then roll their contracts over for the next year after locking in at $60/barrell and skim the month to month differential yields for profits....retailer investors need to ignore the rig count and focus on the supply build...as we hit the onland storage capacity there will be panic selling (next 4 weeks/roll off options this week). Good time to dump USO puts and move into oil service suppliers..there are 3000 wells drilled now and idle, next comes fracking (Haliburton) and then we will see a gradual rise in oil prices as the futures roll off vs. the new fracking wells come on stream....watch the Iran nuke deal...2.8 million barrels/day will quickly come online if sanctions removed...however Kerry will huff and puff, then make more excuses to maintain sanctions...goody more oil for china and tighter bric co ordination. Bye bye Yankee dog!
fun times when you got volatility and financial engineering (only US exports) wrecking the real economy......follow the US or blow up the world economies....and they wonder why people hate Americans