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That's the sound we make at PSW when we get a nice sell-off and it doesn't get much nicer than making $1,500 PER CONTRACT off our call to short Oil Futures (/CL) at $53.20 in yesterday morning's post as we rode down a $1.50 drop back to $51.70.
That wasn't our only winner either – Gasoline contracts (/RB) were shorted at $1.65 and they fell quickly to $1.60 so we took that money ($2,100 per contract) and ran though they picked up yet another $840 in the overnights as gasoline continued to fall – all the way to $1.58 this morning where we flipped long (as well as long on oil at $52.50 on the new, /CLH7 March contracts) – looking for a small bounce but with little conviction – as we still think oil can go lower.
As we have told you, we can make great calls like this because the energy markets are just a scam and we have a pretty good idea of how that scam works.
Now, there are some people (who shall remain nameless) who think that NYMEX traders trading 4 BILLION barrels worth of contracts (4M) back and forth during a month in order to ultimately accept delivery of less than 20M barrels (0.5%) is somehow legitimate speculation but the friction costs alone of trading 200 barrels for each barrel delivered ads $20 to each barrel purchased in the US – even if it were legitimate, the practice should be stopped!
Yesterday, I printed a chart of the NYMEX open contracts and I said that the 197,589 open orders (at 1,000 barrels per contract) for February were FAKE!!! and that they would be cancelled and put into other months to FAKE!!! demand in future months so the cycle can repeat. Our short bet was based on the pressure they had to sell or roll the Feb barrels over the next few days. Already today we can see the difference: