The 'truth' I suggest is not something high on the minds of many ETers. And the 'truth' about oil speculation, as about any speculation, for the dear and sweet little minds of many is that they have not seen very much in their short lives to date. It means if you've bought something as a speculative stockpile you have to sell it - SOONER OR LATER. Now if X zillion barrels of oil has been bought allegedly as speculation, then, yes, follow this little ones (in particular), X zillion barrels of oil (on CL, ICE WTI or whatever) have to be sold. So what does that mean? It means the shit hits the fan and the very high price takes a big dive. Happiness is restored in the great and wide universe of small minds. And their attention can move back, possibly to something which will actually help themselves - how about getting to know how to trade a market with outstanding success?:eek:
I would be very pleased to take every last drop of Libya's oil production at $40 if they're willing to sell for that, for the next 20 years. That oil minister needs to put his money where his mouth is.
I've been an exchange member and a speculator since the late 70's and the one lesson I've learned is not to make value judgements and engage in hand wringing. Just trade. This bull market in commodities is unlike anything I've seen in many years, and presents many good trading opportunities. Frankly, I was pleased to see Minneapolis March Wheat trade well over $23.00/bu. I was glad to see the Minneapolis/Chicago December wheat spread move like it did. Conditions like these present opportunities of a lifetime. Enjoy it while you can. http://masteroftheuniverse.wordpress.com/
Index Speculator Demand is Driving Prices Higher http://hsgac.senate.gov/public/_files/052008Masters.pdf
Excellent and Highly Accurate ......................................................................... Thus what would be the solution as to the financial hit that the third party bag holders are going to take .... ie similar to the 1986 tax reform act and real estate... This is where at the stroke of a pen....legal largesse reveals its unexpected outcomes on either side.... ........................................................................ Obviously, when the majority of the world lives on $200 to $800 monthly ....thus the majority of the world needs relief....and they need it now....not three years from now.... ........................................................................ So just who is it that is going to pull the plug on this one ...... Another huge mess....and this time, the developing world have every reason to complain about unregulated capitalism.... Medicine, food, education, and shelter are human needs and rights.... Capitalism in this form....and Cuban type socialism ....are both very unattractive.... There are better approaches than these....
A couple of observations: (1) Anytime that market action seems to be extreme and adversely affects governments we seem to frequently get these calls about the 'evils' of speculation. The same thing happened when Soros attacked the pound. It was all the fault of the 'evil speculators'. The same issue seems to be occuring again. (2) That is not to say that speculation has not contributed to the price of oil today. However, speculation is only a minor factor in the price rise of oil. The main factors are fundamentally driven as oldtrader quite rightly points out. Let me expand a little on this theme: Demand: the growth in oil demand since 2003 has been in the newly industrialised countries. Asia and the middle east accounted for 60% of the increase in petroleum use between 2003 and 2006. China has been particularly notable in this respect with a petroleum consumption rate of 7.2% annually between 1990 and 2006. There is also huge potential for this growth to continue when you consider that during 2006 China used 2 barrels of oil per person compared to 25 for the US and 6 for Mexico. In addition, in 2006 there were 3.3 passenger vehicles per 100 people in China compared to 77 for the US. In short, there is massive potential for the current oil trends to continue. Supply: There is evidence to suggest that while global demand has been increasing supply has been stagnating. Further information on this can be found at the following website: http://www.theoildrum.com/node/3236 In addition, we have the following supply information to support this view of stagnating supply: *Production at China's biggest oil field, Daqing, has been declining 2.2% per year since 1995 *Chevron reported in 2005 an average decline of 4% in its oil fields *21 biggest oil fields in Texas have had declining production of 7.5% on average per year since the peak in 1974-1975 Thus, the majority of the move has been driven by fundamentals (increased demand and declining supply) with a minor role played of late by speculation.
The fault of the meteoric commodity rise can be placed squarely on the Fed's shoulders. By setting interest rates artificially low and by pumping money into the system like there is no tomorrow, the Fed is the root of the commodity problem. If the US would have the courage to raise rates, watch how fast the commodities would drop. I wouldn't hold your breath though - nobody in the US has any cojones apparently. I.e., even if there is no fundamental demand for commodities, I am sure going to place my money in them while the Fed continues to debase the currency.
http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=aNpbEqWbUwok actually the facts from NYMEX disagree with you. surf