Bob, i hope i understand you correctly. If you are a producer (or major consumer) of commodities, then of course, for you, selling (or buying) forward contracts is a form of hedging against an adverse price move. You are locking in a price and hedging against a drop (rise) in price. This is the kind of thing that commodity producers and users, e.g., farmers, do regularly. For them, it is a form of speculation, since no one knows for certain what future prices will be. But you are so right, ET futures traders don't want anything to do with the underlying commodity so they won't be hedging by actually using the cash market directly -- e.g., they won't actually be buying or selling a boatload of coffee beans and selling or buying a futures contract against the beans-- but regardless of the method they use to hedge, if they do, I think it will be the equivalent of hedging in the cash market. Or at least it better be, otherwise it's not going to be a very good hedge.
Correct. And intervention into the oil trading mechanism will come at a way lower level than 180$ imo. An oil trader here that tells you his livelihood can't be broken is a dreamer.
If you've got a bunch of longs and few shorts, the longs will be willing to pay any price (supposedly) and, as you stated, the shorts will be more likely to jump in as the price rises, right? And as the shorts sell, it adds more fuel to the cycle? Is this the idea??
I cannot see a "glut": The emerging and other economies are just growing too fast. Even if they slowed down to GDP growth just a few %/yr while we went slightly negative, we'd still have a net increasing demand. And with Australia, Mexico, Russia and Nigerian production decreasing for the next few years and Khurai not even coming online until next year, I just don't see how we could get a glut. Mexico is extremely corrupt as is Nigeria - I don't see those changing until they're just plain desperate (maybe four years from now?). Why do you think we'll get a significant oversupply?
1 year in the biz doesn't constitute a "main influence". I'm an EE and take on an occasional diversion for a year or two. I would cycle or walk if that was possible. I did a sabbatical at a hedge fund in Chicago and took the L and Metra. My vehicles sat in the garage. If I lived in the loop I'm not sure I would own a car but here in LA mass transit isn't an real option.
Kudlow tonight mentioned possible CFTC action in the Ag futures market, saying the level of speculation may be illegal. If this happens, they may target oil next.