Dennis Gartman predicts massive waves of selling in commodities

JamesVU2000 · Jun 1, 2008

Speculation is definitely affecting the price, but only because the fundamentals are also very bullish. If there was adequate supply, then all the speculation in the world would not be able to push the price up 150% in one year.

So let me get this straight. The demand for crude oil has double since last august?

i dont think so.

gurucandidate · Jun 1, 2008

Let them ponder this in Washington:

Rising prices encourage increased supply.

So speculators - if they were really responsible for the parabolic price rise -
were instrumental in getting production to higher levels and consumption down, all beneficial.

thrunner · Jun 1, 2008

Quote from gurucandidate:

Let them ponder this in Washington:
Rising prices encourage increased supply.

That only works well in a free market. Oil supply is not a free market. The demand side is a free market - anybody can demand cheap oil or speculate on the price of oil - but not many will get cheap oil unless you live in one of those subsidized countries. Oil companies are also reluctant to increase supplies based on speculative pricing.

JamesVU2000 · Jun 1, 2008

the higher the prices the more bullish the fundamentals become and more perceptions begin to change.
Until prices become so completely out of whack with expectations that prices crash just like the housing market.

This is a market that has gone from 30 to 150 in 5 years with a parabolic price curve.

Is it any surprise the peak oil people are out in force just like the housing market always goes up crowd?

BullAlert · Jun 1, 2008

Quote from JamesVU2000:

Speculation is definitely affecting the price, but only because the fundamentals are also very bullish. If there was adequate supply, then all the speculation in the world would not be able to push the price up 150% in one year.

So let me get this straight. The demand for crude oil has double since last august?

i dont think so.

Agree 1000%.

I suppose we are to believe all those semi-indigent Chinese bike rider converts have no problem ponying up the equivalent of $4 USD to get to where they want to go, too...

lorax2013 · Jun 6, 2008

OK,
first, oil and many commodities are in backwardation - any of you "traders" blaming speculation realize that???
second, the govt and Fed will always blame speculators for price run ups rather than inflation - and certainly no one is going to mention peak oil.
lastly, if you think the commodities markets are going to fall, tell us which ones you are shorting and for how much. The posts are much funnier that way.

blackjack007 · Jun 6, 2008

Quote from JamesVU2000:

So let me get this straight. The demand for crude oil has double since last august?

i dont think so.

demand doesn't have to double for prices to double. the supply/demand/price curve is non-linear. if supply was tight, as it has been, then a modest increase in demand can bring about exponential increase in prices.

makloda · Jun 6, 2008

Quote from blackjack007:
demand doesn't have to double for prices to double. the supply/demand/price curve is non-linear. if supply was tight, as it has been, then a modest increase in demand can bring about exponential increase in prices.

This is exactly what most here don't get. If there is no viable substitute and switching costs are high (as with crude oil) then prices can explode on the slightest upside variation in demand.

Cutten · Jun 6, 2008

Quote from JamesVU2000:

Speculation is definitely affecting the price, but only because the fundamentals are also very bullish. If there was adequate supply, then all the speculation in the world would not be able to push the price up 150% in one year.

So let me get this straight. The demand for crude oil has double since last august?

i dont think so.

If you want to "get this straight", then try reading what I actually wrote, instead of putting words into my mouth. Nowhere did I say the demand for crude doubled.

Demand does not have to double for the price of something to double. Go read an economics textbook, or if you are lazy then just google "price elasticity of demand".

Cutten · Jun 6, 2008

Quote from thrunner:

That only works well in a free market. Oil supply is not a free market. The demand side is a free market - anybody can demand cheap oil or speculate on the price of oil - but not many will get cheap oil unless you live in one of those subsidized countries. Oil companies are also reluctant to increase supplies based on speculative pricing.

It works in any market where increasing supply and/or substitution are not forcibly prohibited. Higher prices encourage production, exploration, substitute energy products etc, all of which - in the long-term - contribute to a significant increase in the supply of energy. If what you said was true, oil could go to $1 million per barrel and no one would increase exploration, or the production of alternative fuels.