Shale Gas Drillers Still Resilient; Low LME Copper Inventory Affects Spread Trading

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Source: Adobe Stock/kropman.

Copper inventories are suddenly low on the London Metal Exchange and U.S. shale gas drillers are still beating the odds and producing oil for a profit.

Low LME Copper Inventory

A slide in copper inventories on the London Metal Exchange to the lowest levels in 18 months is prompting some speculators to shift bets away from volatile benchmark futures to spreads.

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The low levels of LME stocks is expected to send spreads between contract months rising as those holding short positions scramble to cover or roll over their positions.

Trading the spreads allows an investor to avoid having to take a directional view on the benchmark futures market, which has whipsawed back and forth recently, analysts said.

Reshalience

The long-anticipated fall-off in U.S. shale oil output is still proving slower and more tempered than anticipated, impeding the process of correcting the global glut that has walloped prices.

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This month, the Marcellus shale formation of the eastern U.S., the country’s biggest gas play, will yield 17.4 billion cubic feet a day, the U.S. Energy Information Administration said last week. That’s almost 2 billion cubic feet, or 11%, more than the agency had forecast last month.

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