WSJ-Crude's nearly $11 leap to $138.54 -- the largest price jump ever -- is reinvigorating worries about the economy. The sudden jolt has left some OPEC officials complaining privately that the market had lost all logic, and is sure to add fire to accusations that the gush in prices is largely the work of market speculators Now, any fool can see this market has nothing to do with supply and demand. Unless someone knows a supply cutoff is in the offing, then it's pure pump (no pun) and hump. Yes, hump the citizen. I'll be making a list of all those that are claiming it's a legitimate market, so as to make it more convenient to mock them when the truth comes to light.
OK, put me at the top of the list. Oil is a freely traded market. Other than buy and store crude, how would all these evil spec's go about running up the price? Do you think the price might have something to do with oil becoming a de facto major currency, like gold? Do you think worries about Israel attacking Iran affect price? Of course, both could be called speculative but that doesn't make them illegitimate.
All trades are speculative in some form. There is no way oil could have broken out based on a couple speculators manipulating prices. There is much greater demand than supply, which is pegged to some hidden fundamental reason you and I don't know about. But someone knows about it and is buying up all the oil, and when we finally find out about what is going on the price of oil will be warranted. EDIT: That is not to say there is no market manipulation. I'm sure Goldman has probably a billion dollar position and when those reports from GS are released from time to time about their estimates for how high crude is going to go (ie. $200) are really attempts to sell into small speculative buying. BUT there is no way crude oil can make new highs based purely on such manipulation.
You are very wise. The price of oil is artificially high. Short it now, and go on to make your fortune.
It has nothing to do with wisdom. So now , as the pundits are saying, oil is the new gold, since the old gold aint moving too well. More like oil is the new tulips. And if there's manipulation , they are not going to give you the playbook on a silver platter. In fact they love it when folks claim its all quite reasonable, and nothing more than the 'market' talking. The only legit reasons for this crazy spiking is short squeezing or someone knows the supply is going to get cut off. Cause even the imbecile American consumer is gonna stop driving and turn down the heat at these prices.
This is all very simple. June 5th: Rep Stupak points the finger at GS + Morgan *explicitly*. http://money.cnn.com/news/newsfeeds/articles/djf500/200806051748DOWJONESDJONLINE000875_FORTUNE5.htm June 5-6th: MS wants out. What better way without incurring unacceptable losses? Upgrade oil to $150, and trade their 'commercial status' no-position limit account way past the old resistance. I wouldn't be surprised if MS bought 100k-150k oil contracts on Friday. June 9th-10th: Keep the market up long enough to sell the entire position at a profit and be 'done with it' by the time real regulatory change comes. Anyone watching that buying that commenced on Thursday knows that was desperate and unorderly action driven by one or two very strong hands. You oil bulls may call me an idiot in denial of (peak oil), but I'm not. If Americans who make $22K+ per capita can't afford gasoline at $4.50, then Chinese, Indonesian, and Indians who make 1/10th can't afford it at even subsidized $2.50. I'm just excited to see what happens when crude sells off and cuts through 120. Imagine the potential of an 'outside day' after Friday. Where's support? 85? I haven't been this excited about a trade in a long time...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=128374 If the info at the above thread is true, then I think it unlikely that the price of oil will crash until Congress decided to force the ICE to follow the same reporting requirements as the other US exhanges.
Ed Meir, at MF Global in New York, says: âFridayâs move was driven by a combination of abrupt short-covering â after a failure to break $120 a barrel â and buying hysteria.â The fact that short-term prices appear to have been influenced so much by speculators â both on the way down and the way up â is likely to intensify calls for regulation. the stock777 reform act will be law soon.
So who is buying them when they sell and roll out? By definition they have to sell as many contracts as they bought, so why wouldn't that selling exert the same amount of downward pressure as the buying did upward pressure?