[kublikhan]

$this->bbcode_second_pass_quote('mefistofeles', 'I')f anything the commodities market is dwarfed by much larger capital market. Is there a bubble maybe, but there is ALOT of hot money in the world only a small fraction has gone into the commodities markets.

[DantesPeak]

$this->bbcode_second_pass_quote('kublikhan', ' ')You called? I answer. Index speculators have been pumping up the price of oil. Check out this graph of the increasing amounts of index investment money pouring into commodities

[pedalling_faster]

$this->bbcode_second_pass_quote('mefistofeles', 'I') think the key to stopping this tide of inflation would be super high interest rates. We need 12-14% rates here in the US.

[DantesPeak]

Apparently the energy industry completely disagrees with my conclusions, based upon the extracts below. However this may explain why the energy industry is so willing to go short against those who think the price of oil will rise.


$this->bbcode_second_pass_quote('', ' ')
Traders See Formation of 'Blow-Off Top' for Oil, NatGas Futures
Natural Gas Week (Monday, June 9, 2008)
While unnerving, Friday's record-setting buying spree in the oil and gas futures market, with crude gaining an astounding $10.75/bbl, had all the earmarks of a "blow-off top," traders said. But while the steep and rapid increase in price should be followed by a steep and rapid drop, they say, it will be hard to escape the devastating economic implications.


If This Oil Leap Is Not Speculation, What Is Going On?
Energy Intelligence Briefing (Friday, June 06, 2008, 22:24 GMT)
Can an oil price increase of $17.51 per barrel in two days be explained by fundamentals when there were no disasters for oil supply and demand? Analysts agreed on Friday that there's only one thing that can cause this kind of price leap in the oil contract on the Nymex: speculative capital. The energy futures market is increasingly liquid, but too small for the vast sums of global capital betting on oil's price moves on the Nymex and, to an even larger extent, outside the regulated exchanges.

[JohnDenver]

$this->bbcode_second_pass_quote('DantesPeak', '')$this->bbcode_second_pass_quote('kublikhan', ' ')You called? I answer. Index speculators have been pumping up the price of oil. Check out this graph of the increasing amounts of index investment money pouring into commodities

[frankthetank]

Good to know its just a bubble. Hopefully $2 gasoline is right around the corner. Its all economics, oil production has nothing to do with the price of oil.

[TheDude]

$this->bbcode_second_pass_quote('JohnDenver', 'h')ttp://www.nymex.com/how_exchang_works.aspx?pg=2

[DantesPeak]

$this->bbcode_second_pass_quote('JohnDenver', '')$this->bbcode_second_pass_quote('DantesPeak', '')$this->bbcode_second_pass_quote('kublikhan', ' ')You called? I answer. Index speculators have been pumping up the price of oil. Check out this graph of the increasing amounts of index investment money pouring into commodities

[mefistofeles]

$this->bbcode_second_pass_quote('', 'B')UT - the interest on the national debt would go ZOOM (up) (up as in un-affordable).

[DantesPeak]

Many speculators are trying to short oil trading vehicles. Somehow those complaining about speculation (including those in Congress) keep ignoring the fact that those speculators may be betting on prices to fall.



$this->bbcode_second_pass_quote('', 'C')ommodities: Last Call?
New Funds Allow
Investors to Benefit
If the Bull Run Ends
By CAROLYN CUI
June 14, 2008; Page B14

Investors are getting worried that the commodities party may be drawing to a close, and Wall Street is introducing funds designed to capitalize on the choppy market.

Over the past seven years, commodity prices have soared with the S&P GSCI Total Return Index rising nearly 300%. But starting this spring, with the huge exception of oil, many key prices have eased.

Several new funds and securities take short positions on commodities, allowing investors to benefit from any drop in prices. But investors should exercise caution. These funds often pursue complicated strategies, some going long on certain commodities and short on others. And, if their particular bets go sour, they could pile up big losses. Many funds are leveraged, which will magnify gains or losses on the investments.

Deutsche Bank AG is scheduled to launch eight exchange-traded notes, or ETNs, soon, four of which bet on crude oil and base metals to fall, and four bet them to rise. ETNs are a type of debt securities whose payout is linked to the performance of an underlying index. These short products will be added to the German bank's existing six short products on gold, agricultural products and the Deutsche Bank Liquid Commodity Index -- the only short products available in the U.S. market before the Direxion fund was launched.

With a short note, investors will make money when the underlying commodity is falling. For example, DB Gold Short ETN, the first short product launched by the bank in March, gained 13.3%, while gold fell 11.3%.

Energy, the best-performing commodity sector, has been the focus of heavy short-selling. United States Oil Fund, the biggest ETF tracking the price of crude oil, is among the most-shorted funds. During the first five months, while oil prices rose 33%, the fund's short interest, or the number of total outstanding shares sold short, soared 140% to 16.26 million shares, about two times the fund's total shares, according to Nasdaq OMX Group Inc. The average short interest among U.S.-listed ETFs is 10%, according to Morgan Stanley.

[joewp]

Additionally, the put/call ratio of USO is 1.76, meaning for every 100 calls(option bets on the price rising), there's 176 puts (option bets on the price going down). Zacks.com

I keep hearing how it's speculation that's the problem, but I keep seeing just the opposite, speculators are actually keeping the prices down. A lot of speculators are going to lose a lot of money when crude keeps going up. They're going to have to buy back those short contracts at much higher prices.

Imagine that, losing money in one of the greatest bull markets of all time, simply because your "economic model" doesn't account for depletion of natural resources!

[kublikhan]

$this->bbcode_second_pass_quote('DantesPeak', 'M')any speculators are trying to short oil trading vehicles. Somehow those complaining about speculation (including those in Congress) keep ignoring the fact that those speculators may be betting on prices to fall.

[DantesPeak]

$this->bbcode_second_pass_quote('kublikhan', '')$this->bbcode_second_pass_quote('DantesPeak', 'M')any speculators are trying to short oil trading vehicles. Somehow those complaining about speculation (including those in Congress) keep ignoring the fact that those speculators may be betting on prices to fall.

[kublikhan]

$this->bbcode_second_pass_quote('DantesPeak', 'I') never said there was no speculation, or no manipulation, but that the sum total of speculation/manipulation in the oil market is insignificant in the long term.

[BAM]

Here's a good article on commodity speculation

http://www.spiegel.de/international/wor ... 50,00.html

[DantesPeak]

$this->bbcode_second_pass_quote('BAM', 'H')ere's a good article on commodity speculation

http://www.spiegel.de/international/wor ... 50,00.html

[BAM]

Lieberman bills would curb energy speculation
Conn. senator aims to curtail institutional influence on energy markets
By Laura Mandaro, MarketWatch
Last update: 2:04 p.m. EDT June 13, 2008
Comments: 68
SAN FRANCISCO (MarketWatch) -- Institutional investors in commodities face one of their biggest threats to date in a draft Senate bill, set for airing next week, that would prohibit these traders from buying oil and other futures contracts after they reach a certain limit.

http://www.marketwatch.com/news/story/l ... t=hplatest

So this would make no difference at all?

[DantesPeak]

Again, I didn't say it would make no difference. But for example, let's say they shut all US commodity markets.

There would be nothing to stop futures trading in other countries. In the article it says the ICE has no position limits, so speculation would continue anyway. Also there would be nothing to stop someone from buying oil and storing it outside the US.

[BAM]

$this->bbcode_second_pass_quote('DantesPeak', ' ') That $190 billion sounds like a huge amount, but isn't that a small amount as compared to the $5 trillion in oil sold per year?

[BAM]

Germany in call for ban on oil speculation

By Ambrose Evans-Pritchard
Last Updated: 12:53am BST 27/05/2008

German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.

It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.
http://www.telegraph.co.uk/money/main.j ... oil126.xml

This might throw a spanner in the works