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They got plenty of storage (supply) and IMO it is indeed the midstream companies (the "merchants") the ones who set the prices. MLP's open and close the valve of their own tank farms.
I backtested the commercials net positions and they are pretty correlated with crude prices. BUT just keep in mind the COT has a (3) day lag, a lot of positions can be switched in those 3 days.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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They rarely do. In fact in my experience when they do hedge it's often forced by their banks rather than their choice. I guess it's understandable in that if they weren't bullish the commodity, then wouldn't be in the business. Still bad management.
Hmmm... not sure I agree but I have nothing to support that
You have to be careful. Commercial does not always equal commercial. It is (or at least always was) quiet easy to get hedge exemptions etc. I don't remember the exact details but they reclassified Vitol from a hedger to a speculator a few years back, and the impact on the COT was enormous.
off topic but im just curious about this and wondering if someone could explain:
"What is most ironic is that Saudi Aramco just slashed prices for crude oil to everyone around the world."
article is a few days old but what does this mean? what is the difference between the spot/futures market and then this other type of market that apparently exists? you can call aramco direct and negotiate a price for oil?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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Many state run energy companies sell their crude oil at a predefined formula plus or minus a constant. Then each month they will adjust the constant but not the formula itself. So the formula will move up and down with market prices.
Saudi have different formula's for different parts of the world. A google search shows that Saudi cargo's destined for North America are priced basis the Argus Sour Crude Index (ASCI) which is a USGC Sour Crude Index based upon physically traded volumes of Mars, Poseidon & Southern Green Canyon. (Kuwait and Iraq also index to ASCI).
I believe that Saudi crude is not only 'destination restricted' but also 'resale restricted' as well. Meaning you can't resell it and you can't redirect the cargo to a different location. So the people who buy it are the people who refine it.
This will be interesting to watch unfold. Chanos also apparently has shorts on RDSA and SCTY which makes me think that he is bearish on energy stocks across the board but probably wants to drum up interest and support on this knowing Icahn is involved.