Spidey there was never a shortage of wheat? Ha Ha what fucking planet are you on pal, and I don't know if you haven't been watching the news and seen the massive flooding in the midwest but there is definitely less corn.
but these excess long positions are offset by shorts on the commercial side. its always net zero in futures. There is a short for every long, because there are two sides to every contract. speculators may be driving price, but they aren't doing it via the futures market. There is a shitload of non exchange type of investing that the hedgies are involved with that is not regulated. If specs are driving the market, that is where its happening. Don't blame the futures markets.
http://www.youtube.com/watch?v=PNp0y0SjOkY this viedo says that the reason for these commodities prices are because large hedgefunds & investment banks are hoarding these commodities. He mentions the the largest holder of heating oil in the UK is morgan stanley. I'm still not sure how this is exactly working? What is morgan stanley going to eventually do with all this heating oil? Wouldn't you think that all the "buying" that they've been doing would eventually equate into a whole ton of "selling" bring the price to back to where it was @ before they started buying?
Doesn't matter who is classified as commercial. There is a short for every long in futures trading by definition. Futures traders provide liquidity, and may exacerbate volatility when stops are set off, but they are not the reason for the overall direction of the market. Speculators in the off exchange markets are another matter entirely. Hedgies are not limited to how much they can snap up in unregulated markets, and there isn't always a short to take the other side.
I find a few things unique and confusing about the oil markets. While I generally believe in supply and demand theories in 'the markets', I think the discussions of oil are greatly confused by the fact that the global price of oil is set a bunch of guys standing around in a pit trading a few derivative contracts that are only slightly representitive of the underlying. What I mean by this is that there are not an equal number of contracts out there to the known physical reserves in the world. The futures are mearly a small representitive fraction of true supply of oil that exists. To me this would seem to completely throw out the supply-demand argument for oil. The price is being set by the supply of contracts that are being traded, not by the amount of crude oil that is actually being pumped out of the ground, or available to be pumped. Exacerbating this would seem to be the fear, if not the actual inability to short crude. To me there is a real disconnect between the demand by the world, the supply available, and the use of the futures markets as a pricing mechanism for the product. And yes I am ignoring 'rack rate' price, and focusing stricly on the futures price of WTI. Comments?
This actually isn't true, and recent studies have shown this to be the case even in today's markets. Futures trading, via the EXCHANGES, are a reflection of where prices are going, but not the cause of it. If this was the case,, prices never would have languished for years below $20 going sideways. Once again, there is a short for every long in exchange traded futures. Off exchange speculation is completely different, quite massive, and may indeed help to drive price. Many people blame the futures pits (and electronic trading) because the price we pay is derived from this, but the futures price itself reflects expectations of the future when taking into account demand growth, the dollar, etc. Futures actually reflect, not create price direction.