Ok.
Good points to discuss.
1.
$this->bbcode_second_pass_quote('', 'T')his may be the point you are making as well but I just wanted to be clear the bull market in oil is not caused by speculators.
PeakOil is You
It sure did get quiet in here all of a sudden
Re: It sure did get quiet in here all of a sudden
by Ming » Thu 20 Mar 2008, 10:54:56
Of course it is not!
Speculators drive the short-term price movements. Not the long-term overall tendencies.
2.
$this->bbcode_second_pass_quote('', 'T')he percentage of the net postive long position for speculators to total contracts has only increased by 2% since the price of oil has gone up $40. Are we to believe the extra demand for 2% worth of long positions has caused the oil price to almost double. I don't think so.
Your values are wrong.
Look here for the net long non-commercial positions on May 1 2007:
196 326 - 116 435 = 79 891
And look here for the net long non-commercial positions on March 4 2008:
292 115 - 140 971 = 151 144
These are the kind of positions I analysed, as stated in my previous post (and in others before).
These are the combined futures+options positions that appear on the single week table I linked. (Of course, a buying pressure on options has a direct pressure on prices with the same strength of a similar quantity of buying pressure on futures, and so this are the numbers that need to be studied.)
Anyway, I clearly stated that the effects of financial speculation of futures prices have a short-term impact!
They dominate the price movements on weekly and monthly terms, not over almost a full year (the time interval you used!).
This not an opinion I am presenting, this is a verifiable fact.
AGAIN:
Study the weekly (Pearson-r) correlation between the net non-commercial futures+options positions changes and the weekly changes of crude oil spot prices, and verify this fact for yourselves!
AGAIN:
Financial buying and selling are the main drivers of short term price movements, not of long-term price tendencies!
They are the reason for price movements of some $10 to $20 around the long term average, not for 100% price increases over several years.
They were the reason for the prices to drop from $60-$65 to $50 in Jan 2007, and so on.
Is that clear?
3.
$this->bbcode_second_pass_quote('', 'I')n addition to what mkwin said, this doesn't explain if there was so much speculation why physical inventories of oil haven't changed much at all in the last few years.
So no, I am not convinced that speculators are keeping much if any oil off the physical market.
Even if I did agree with you, 150 million barrels of speculation is a drop in the bucket compared to demand of 85 million barrels per day.
Speculation is not specifically based on the evolution of stocks, although that is clearly one of the many factors that is followed by the speculators. Speculative buying and selling is based on several factors, but the most important of all, are market cycles independent of physical production, stocks, or demand realities.
I am not convinced that speculators are keeping any oil off the physical market!
150 M barrels are net positions on the US markets. Compare them with 20 M barrels/day of demand, not with 85 M...
Those net positions change sometimes by some 20 M in a single week. That represents a buying or selling pressure of some 3 M barrels each day of the week, oscillating around the average (physical based) buying of 20 Mb/day.
That means that in some weeks the USA is buying 23 Mb/day, some other weeks it is buying 17 MB/day.
Do you understand why that provokes an important price pressure?
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Ming - Lignite
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Re: It sure did get quiet in here all of a sudden
by centralstump » Thu 20 Mar 2008, 11:12:27
$this->bbcode_second_pass_quote('Heineken', 'L')and has intrinsic (and even spiritual) value that is outside the economic sphere. Also, IMO an investment doesn't have to increase in dollar value to be a safe haven. To me a safe haven means you don't lose your shirt. Perhaps I'm an oddball, but I'm satisfied with that sort of investment performance, and this philosophy has served me well. (Similarly, I see PMs as a store of value, not necessarily a route to riches. As long as you're dollar-cost averaging over long periods, the fluctuations in the value of PMs are incidental.)
But lets be serious here. Forget the spiritual value. I own some farmland and it is making a fortune. Biofuels have hitched corn prices directly to oil. It's like owning a renewable oil well. Once corn is locked in, every other grain and cattle follow.
OIL = corn = cattle = soyboeans = wheat
They are highstepping together like the Rockettes!
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centralstump - Peat
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