Quote from empee:
It is clear that this is happening, you will sell commodities sell off with a rally in the Yen implying that a lot of the speculation is because of the carry trade. Oil can't be delivered (stored offshore) yet prices are going higher, in addition we have backwardation in pricing implying that everyone is trying to sell at today's prices (since the future is cheaper). If there indeed were a suplply problem why are people in such a hurry to sell today?
lot of misinformation here. when a commodity goes into backwardation, that implies higher PRESENT demand. Its a bullish sign. People are BUYING today's spot, selling the rear. There's not even much of a way to profit by buying spot and storing the commodity and selling it at a future price (no incentive since its a losing trade).
When fundamentals aren't as solid, 'speculative' premium sends markets into contango - meaning traders are willing to keep rear months higher over market uncertainties that are actually not present issues (ie fear of an Iran blowup).
If you get a hurricane, watch the price gap between winter and front month natural gas close or even invert, because of supply worries.
This latest oil move is all a reaction to declining production and OPEC steadfastness not to raise their targets. The supply/demand margin is thin.
Look at the 200-day or longer moving average on oil price, and thats fair value, for the moment.
As for other people's statements in this thread 'oils a commodity, like tulips, and when people figure this out it'll crash' - thats about as meaningful a statement as 'stocks are useless' - at least you can live in your house. I dare you to short RIMM and buy a house at market price right now. Tell me how you do in the short term (1 year).
This has to be one of the most pointless threads on ET, and I should be ashamed I'm responding.
By the way, to original poster: I think the real problem in any speculative physical market is the ability to trade a financially settled contract and have the power to move price. Exchanges like ICE facilitate this with their financially settled swap products. That IS a REAL problem with oil and natural gas right now, especially thinner markets like natty. That creates opportunity for more price distortion. But in a futures market without these swap products, I think its a good thing. If you force speculators to close the positions they open, you return balance to the market and over time, price is fair.
I also like the idea of increasing margin requirements - 4:1 to 2:1 overnight leverage for speculative accts would be appropriate to cease fund manipulation power. But OTC contracts follow different margin/credit line rules all together ... so I don't know how much a difference it would make unless all the exchanges and trade facilitators really decided on uniform policy.
