Be careful there. Expectation of future price is actually an input that affects current price - this has been academically dealt with as well as proves to be common sense. It's the engine that drives bubbles. Anyone who thinks price doesn't serve as an input into direction of price needs to put a little more thought into it. It doesn't operate in a vacuum. Buying begets buying, and it *does* certainly matter that now commercials happen to include investment banks that are acting as a proxy to index buyers. When their buying moves prices on futures markets like we saw a few weeks ago (up $17 in one 24 hour period), it affects cash trades likewise. Nothing happened on that Thursday-Friday -fundamentally- to change cash price by $17 other than futures price changing by that amount. Hell, banks are so low on capital they are margin calling *PRODUCERS* that actually have commodity to deliver on their hedges. I'm sure this coordinates perfectly with index buying. With that said, take a look at net open interests on CFTC COT on a historical basis, comparing commercial positions this month to those 2 years ago. We're talking a net million contracts extra positioning. Those are long contracts that are perpetually rolled over held by indexers and 'investors' long crude. Obviously this is a supply < demand justified move, but 1m contracts extra open interest = 1B barrels of speculative crude (its not purchased to be burned, its just rolled forward inevitable) in an inelastic market. On the flip side, imagine what 1B barrels for sale (flood to the exits) would do to the market. Just as Bodman (looks like Cheney doesn't he?) says +1% of demand increase moves the clearing price up 20%, what do you imagine -6% demand would do to price? -6% demand would result simply from index speculators selling their entire position (1B barrels lets say) 5M barrels per day over the course of 2000 days. I doubt the exit would be so orderly. Add that to demand destruction that will result from new chinese fuel consumption subsidy removals, our existing demand destruction, lack of new chinese buying of diesel to replace coal burning plants in effort to clean air for the Olympics, etc. etc.. With a potential unwinding of indexers compounded to demand destruction, we're easily looking at a demand drop of an arbitrary 10% going forward. Even though only 4% of that demand is directly physical, the other 6% will affect price just has it has moved it up. I've been reading your posts without much comment; You seem so proud that you know it all ... I'm saying you don't have a leg to stand on concerning certainty or even credibility.
rollover (sell front buy rear) before expiry. And anyone looking at noncommercial is completely ignorant to the details that have been pointed out as of late concerning positioning methods of index specs, thus disregardable. By the way interesting CFTC data this week. http://www.cftc.gov/dea/options/deanymelof.htm Note this is effective June 17. Notice the mkt's massive declining open interest in both spec and nonspec (7.4% decrease in nymex alone). But look closely and net longs increased 5K over last week. Code: ------------------------------------------------------------------------------------------------------------------- : Total : Reportable Positions : Nonreportable :---------------------------------------------------------------------------------------- Positions : Open : Non-Commercial : Commercial : Total : : Interest : Long : Short : Spreading: Long : Short : Long : Short : Long : Short ------------------------------------------------------------------------------------------------------------------- : : (CONTRACTS OF 1,000 BARRELS) : : : : All : 2,811,842: 244,275 139,156 848,322 1,619,494 1,712,099 2,712,091 2,699,576: 99,752 112,266 Old : 2,811,842: 244,275 139,156 848,322 1,619,494 1,712,099 2,712,091 2,699,576: 99,752 112,266 Other: 0: 0 0 0 0 0 0 0: 0 0 : : : : : Changes in Commitments from: June 10, 2008 : : -225,130: -7,775 -11,460 -125,403 -107,354 -108,930 -240,533 -245,794: 15,402 20,663 The market adjusted longer than the previous week. Still a bubble. Not that this data even tells the whole picture ... ICE/Dubai, cash, etc not included.
anyone think Arabia will let the price fall from 135 to 80 just because they're nice guys? yea riiight...
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