Posted on 06/27/2008 2:39:03 PM PDT by kellynla
It is the “beliefs and opinions” in the market that determine where things go. If supply rose substantially, and the world still thought we were running out of oil, then nothing would change. If THIS reversed, they they would be out.
They are opportunists, like ALL traders, and will take advantage of the market's FEAR or GREED.
One thing I haven't pointed out, is this is the way George Soros (and his type) make their money. He destroyed the British Pound, by taking advantage of growing concerns about the Bank of England, and piling on money to over burden the FX market on the bearish side...he created the straw that broke the camels back and then covered his positions when others joined in.
He did the same in the corn market several years ago by getting long — big time — and then using his “reputation” to get on TV and in print touting the “worst drought in decades” and then took his profits when the world joined in buying corn futures. BTW, the exact top took place one week after he “went public”.
There are a LOT of oil analysts that work for investment banks and all over the oil industry -- NOT regulated like stock anaylsts are NOW about conflict of interests -- that WANT the price to go up. They "go public every day" — just like the stock analysts did for their companies pre-crash of 2000.
Read back about Goldman Sachs and others and their "pronouncements" on oil over the last couple of years. They don't sell commodity futures retail — but — they trade them for the “back of the house” (their direct profit) and their VERY high wealth clients individually -- plus -- their own hedge funds (for big money clients only)
Why would you expect shortages? There are no price controls.
If there's a demand shock and no corresponding supply expansion, then prices will go up until demand is sufficiently curtailed so that demand and supply are again equalized.
The only time you'd have shortages is if prices aren't allowed to rise. Then demand would be exceeding supply. But so long as prices are allowed to go up freely, that won't happen.
Duh, I was agreeing with you.
Sigh. That comment is so stupid it's not worth a response.
Sorry, just trying to get into the mindset of 11th Commandment. Relax, have a beer.
Sorry, just trying to get into the mindset of 11th Commandment. Relax, have a beer.
Good advice! Arguing with economic luddites can be so exhausting!
I'm with you buddy.
People tend to assume all supply and demand charts have lines that converge at a nice right angle.
Thank you. I appreciate your reply.
Oil price has risen over 65% in 9 months. Neither the supply and demand parameters nor the lower price of the dollar will justify such a crazy and unrealistic increase not even close. The arithmetic is so simple here and the only conclusion is that the over inflated oil price is due only speculators. The price of a barrel of oil should not be more than $ 80 based on supply and demand and/or the lower dollar value.
This crazy oil price is not capitalism nor free market anymore in fact it against everything we stand for in a free capitalist economy. What the oil speculators are doing is wild and crazy stuff that has nothing to do with the fundamentals of our free market economy.
People who are defending oil speculations thinking that they are defending "free market capitalist" economy are totally wrong. What the oil speculators are doing now is totally opposite to our "free market capitalist" economy.
That’s basically what the article I linked to was saying.
A half million barrels a day isn’t squat and it comes from a supply that is tapped and controlled by the Saudis. I think it would be different if our own reserves, yet tapped, were seriously put into the equation.
Are they capable of somehow continually rolling these long positions over so that the bubble either never bursts or takes ten or twenty years to burst??
Don’t worry, the speculators betting it will continue to rise will soon see the house of cards come crashing down. There is no way they can support this margin indefinitely.
Agree 100%.
“There is a reason why the SEC treats COMMODITIES differently than stocks or bonds. People need COMMODITIES to live. They should not be used as a gambling chip.”
I hope that is sarcasm. You can’t be that naive.
Commodities are a generic good — oil is oil, wheat is wheat, copper is copper, gold is gold, corn is corn, pork bellies are pork bellies — available anywhere in the world and subject to whatever price the highest bidder is willing to pay.
That means anywhere in the world. In the majority of those places, the SEC has no jurisdiction to control anything. Remember that US exchanges must compete with other exchanges around the world. That means any attempt by Congress or the SEC to restrict the activity of traders on US exchanges will simply cause the trading to move to other exchanges — London, Stockholm, Shanghai, Tokyo, etc. Commodity markets by the nature of the products traded MUST be the loosest markets — much looser than equities markets where buyers require some impartial guarantee of the accuracy of a company’s books, etc. which governmental supervision like the SEC provides.
Small differences in currency exchange rates cause only minor shifts — oil is up 40% in Dollars and 35% in Euros. Supply tightness causes huge swings compared to currency exchange rates. We still have all the oil we want, because we are willing to outbid people in other countries. That is the only reason you don’t see gas lines, like in the 70’s when they tried to control prices and found that they couldn’t force oil producers to sell to the US at lower prices than other parts of the world were willing to pay.
Of course, people can bid up the price of oil simply by their willingness to pay more for it, and if they think the dollar will be worth less in the future, they might do that as a hedge against a falling dollar. That has no effect on supply & demand except to possibly spur more supply to cash in on the higher price. This phenomenon will be short-lived, however, as the eventual physical delivery of all this additional supply will cause a glut of oil into a market where demand has fallen. Many sellers and few buyers will result in a sharp sell-off and we’ll have yet another financial market bubble burst.
All those pension funds and mutual funds that have shifted money into oil would be wise to short it at this point and buy equities which are at rock-bottom prices. Buy GM today at under $12 and watch it triple over the next two years.
Who cares? Things cost what they cost. And they cost what they cost because that’s the highest price they can fetch.
Is this news to you?
We few, we happy few, we band of brothers...
Sounds suspiciously similar to what happened in the housing market.
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