Oil?

[usmbtech]

The price of the march oil contracts were up 10% on Friday.. how do you think it will play out next week?

 

[Toro]

It was up because there are lots of funny things going on with the USO. The USO buys near month futures contracts and sells long-dated futures contracts. Currently, near month contracts are much less expensive than long-dated contracts, known as "contango," which means the USO is losing money. On Friday, the fund administrator announced they were no longer buying March contracts and started buying April contracts. This caused the traders that were shorting the March contracts because they thought the USO was still buying, to cover their positions and buy out their short positions. This caused the price of oil to spike.

Notice this has nothing to do with anything fundamental.

I have no idea where it is going in the near-term but I believe oil is trying to put in a bottom.

 

[Paulie]

It was up because there are lots of funny things going on with the USO. The USO buys near month futures contracts and sells long-dated futures contracts. Currently, near month contracts are much less expensive than long-dated contracts, known as "contango," which means the USO is losing money. On Friday, the fund administrator announced they were no longer buying March contracts and started buying April contracts. This caused the traders that were shorting the March contracts because they thought the USO was still buying, to cover their positions and buy out their short positions. This caused the price of oil to spike.

Notice this has nothing to do with anything fundamental.

I have no idea where it is going in the near-term but I believe oil is trying to put in a bottom.

I understand USL is a better oil play, as it's spread out over 12 months rather than the front month. What do you think?

 

[Toro]

It was up because there are lots of funny things going on with the USO. The USO buys near month futures contracts and sells long-dated futures contracts. Currently, near month contracts are much less expensive than long-dated contracts, known as "contango," which means the USO is losing money. On Friday, the fund administrator announced they were no longer buying March contracts and started buying April contracts. This caused the traders that were shorting the March contracts because they thought the USO was still buying, to cover their positions and buy out their short positions. This caused the price of oil to spike.

Notice this has nothing to do with anything fundamental.

I have no idea where it is going in the near-term but I believe oil is trying to put in a bottom.

I understand USL is a better oil play, as it's spread out over 12 months rather than the front month. What do you think?

I don't know much about the USL, to be honest.