Reading the Futures Market

Some interesting developments in the futures market. This from Bloomberg:

May 21 (Bloomberg) -- Oil rose above $130 a barrel for the first time after at least five banks raised price forecasts in the past week on expectations supply constraints will persist.

Crude oil for July delivery gained as much as $1.21, or 0.9 percent, to $130.28 a barrel, in electronic trading on the New York Mercantile Exchange. It traded for $130.22 at 11:13 a.m. London time.

Oil for delivery in December 2016 surged $17.08, or 14 percent, in the three trading days since Goldman Sachs Group Inc., raised its forecast to $141 a barrel for the second half of the year. Yesterday, Societe Generale SA and Credit Suisse raised their forecasts, while billionaire Boone Pickens repeated his prediction for $150 oil this year.

``You see more money going into the back end of the curve,'' said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Swizterland. ``The issue is not the fundamentals. What's bullish is the comments from people like Goldman Sachs, Boone Pickens.''

To contact the reporter on this story: Christian Schmollinger in Singapore at Christian.s@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net.

What I want you to focus on is not the comments, but the action in the markets. The actions don't lie. What the futures market are telling us is that traders/investors are bidding up the back end of the curve in the market. In other words, high oil prices are here to stay. The smart money is saying that no matter what happens short term, oil is gonna climb higher.

Start investing accordingly. On another side note, the drillers are looking cheap vs the price of the commodity. In fact, the juniors are scary cheap. The juniors are where the real value is. I own a bunch. Do your own homework, but moving forward, you want to place your bets on the juniors.