Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Posted: Thu Jan 26, 2006 1:50 am Post subject: Re: Development of increasing oil futures contango?
No, I do not know of any studies, but you can easily create one if you have access to historical data, bloomberg for example. Download CO1 or CL1 into an Excel spreadsheet in one column and CO2/3 or CL2/3 into a another column and then run a chart. You will quickly see how often the near future month is below the next future's month. However, I am not sure of what value it would be as current supply & demand effect backwardation or contango now but past events do not effect supply & demand going forward (unless you count taking decisions to build or not to build refineries, but that is academic). Therefore, for predictive value it is of very little value. Good luck. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Jan 26, 2006 2:04 am Post subject: Re: Development of increasing oil futures contango?
I don't know much about economics, but I was thinking about trying to build an expectation of the progress of the average future price, by separating futures from actual seen price.
Say for example the price-derivative X months ahead can be predicted by looking at the difference between the derivative of the average seen price and the derivative average future price.
Posted: Thu Jan 26, 2006 2:19 am Post subject: Re: Development of increasing oil futures contango?
Corpsicle wrote:
I don't know much about economics, but I was thinking about trying to build an expectation of the progress of the average future price, by separating futures from actual seen price.
Say for example the price-derivative X months ahead can be predicted by looking at the difference between the derivative of the average seen price and the derivative average future price.
you can use historical data to calculate exactly what the historical spread has been on average, but it is of little use for predicting what the spread will be in the future, just as last winter's weather gives me an idea of the range of temperatures I might expect, but has little to do with this year's winter weather.
the cash market is a better predictor of where futures are going in the short term, but even then this year's contango markets do not necessarily predict contango for the future, just that there has been more than adequate physical stocks to meet demand, limited storage, but futures were high on supply disruption worries which did not materialize or were not as bad as feared (i.e. Katerina/Rita + a mild winter). _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Conclusion
Oil futures prices contain important information about future oil price movements, especially for the near term. In particular, taking into account the relationship between current spot and futures prices instead of considering only the raw futures price can significantly improve forecasting accuracy. Prediction errors, however, are still substantial, and accurately predicting the future price of oil seems as elusive as ever.
My thanks to Policy Pete who spotted this article and posted it to his page Policy Pete which is another excellent source of information on energy markets in general.
Good luck and have a nice weekend. Cheers. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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