Bangkok. I'm fairly certain I've told you once before if you're ever here, dinner and drinks are on me.
Mav, thank you. It seems there's a trade in bear CLV7-X7 if I expect the spread to go to full carry. With that said, bear spreads feel like selling options, it realistically can only go to full carry and we all know the old adage about pennies in front of a steamroller..... On a side note, how did you get to that conclusion? I'm aware you are Lord Mav, but I wouldn't have come up with that thesis. Hell, I came up with no thesis which was why I posted here.
There is no full carry in oil like there is in grain. The spread value is governed by the marginal cost of storage which changes in real time. Regarding my "thesis", it's been widely reported that producers have been selling the 17 and 18 strips aggressively to lock in the forward prices so they can borrow more capital to increase production. Their capacity to borrow is tightly tied to how much forward production they have already hedged. So they want to lock in low borrowing rates now to facilitate production and to do that they need to get as much of their reserves hedged as possible.
What does a flat or inverted curve mean for storage then? There is too much storage out there/not enough production? I highly doubt it's the latter if producers are indeed hedging out on the back months. Storage should also always be a positive number? Can't see where it would be negative, or 0 in normal contango markets(not 08). That would imply something. But what?
You just walked into my wheelhouse. LOL. I did a paper on this. I'll tell you what, this is pretty complicated stuff. Over the holiday I'll do my best to summarize my research and explain this topic on here.
Always learning. Never stop learning. Not taking classes. This business changes everyday. Whatever you learned last year is in the past. I still have a lot to learn as do we all.
Merry xmas to all the ACDers on here and Mav thanks for your continued insights and support provided in this thread.