If heggies & investments banks are the reason for the run up...

Quote from RiceRocket:

You forget, it's a liquid market. There are also short sellers that want to cover to move into the next month, they are buyers.

Also, if funds are bullish on crude, they would add some to the position as they roll forward. If you remember though a couple months ago when crude took off, even the very back contracts years out were bought up.

The original cause of this move was supply tightening to offset the dollar decline, now it has turned into an outright bubble. I don't blame the speculation, it's a symptom, not the cause.
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NO NO NO!!!
If you are not taking delivery you are NOT moving the market on an Inter-contract basis. If it's a liquid market, if you start short and buy to close or start long and sell, THAT HAS NOTHING TO DO WITH IT.!!!!!

If I wanted to buy 1,000,000 contracts of oil I'd drive the price up a shit load, however if I wanted the price of oil to maintain @ it's level the ONLY way would be to take the delivery of 1,000,000 contracts. If I sold em' the price would go down near to where I bought it at. Same thing works on the sell side


The price of oil is determined by supply and demand at contract expiration. ------> how many people want to take delivery at a certain market price. NOW because oil has been moving up that means that buyers are willing to pay more for delivery, so DEMAND MUST BE MOVING UP (if supply is =)...


but from whom???? They say that commercial demand really hasn't increased that much. So who are the aggressive buyers? The hedge funds & investment banks.

I really don't think this is too hard to see. But the ? is WHY?
 
Quote from ProgrammerGuy:


If I wanted to buy 1,000,000 contracts of oil I'd drive the price up a shit load, however if I wanted the price of oil to maintain @ it's level the ONLY way would be to take the delivery of 1,000,000 contracts. If I sold em' the price would go down near to where I bought it at. Same thing works on the sell side
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First all; if you want to buy these contracts; someone(may include yourself) have to sell it to you; either by the producers or shortsellers. When you know the producers can not provide upon delivery dates by any reasons; and these shortsellers have to cover these short before the price going higher.

What is the word for this situation? oh; short squeeze :D
 
Quote from ProgrammerGuy:

Yes I understand that, that you can roll into the next month. But if all the hedge funds DID that, how would that drive up the price, because every contract month they wouldn't be net long, that'd be flat!!!!!
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No, because they add to their positions.
 
Quote from number22:

First all; if you want to buy these contracts; someone(may include yourself) have to sell it to you; either by the producers or shortsellers. When you know the producers can not provide upon delivery dates by any reasons; and these shortsellers have to cover these short before the price going higher.

What is the word for this situation? oh; short squeeze :D
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----------------------------> this is true. But what does this have to do with what we're debating?
 
Quote from forextrades:

No, because they add to their positions.
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----> I think you've missed the point. What we're saying is that can't you affect the market (longer term) if you do not take delivery @ contract expiration. Because for every long & short you close out equating to being flat
 
Quote from ProgrammerGuy:

If heggies & investments banks are the reason for the run up in commodities prices can someone PLEASE PLEASE answer this.


If you say that the hedge funds and Investment banks keep on driving prices higher, they do that by buying. Well if they are buying then you MUST take delivery of the commodity. In a you tube video http://www.youtube.com/watch?v=PNp0y0SjOkY it says that Morgan Stanley is the #1 holder of heating oil in UK.

What are they doing with all that heating oil? If Investment banks & hedge funds are NOT using heating oil, crude oil, sugar, corn... etc and they are in fact hoarding it, then wouldn't they eventually have to sell it? causing the price to go back down to where it originally was?
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Wow actually come to think of it, I see what your saying. If speculators are not taking the delivery of the contract then if "there is huge say buy speculation" then youd probably see a huge sell off right at expiration because these people have to get out. But it doesn't
 
Quote from ProgrammerGuy:

They say that commercial demand really hasn't increased that much. So who are the aggressive buyers?
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Maybe another way to say this is "They say that commercial demand by entities *** that use the U.S. futures market *** may not have increased very much."

But I doubt that the demand expressed by the entities that buy crude oil and refined products for China and India can be accurately analyzed by looking at the "commercial" data provided by the CFTC / NYMEX.

It is quite possible that these entities that purchase crude oil for China and India purchase the physical crude oil directly from the oil producers via supply contracts or with "spot market" purchases of physical crude oil. Either of which would not necessarily involve the use of either the NYMEX (or the ICE).


The evidence pointing to the "aggressive buyers" is more likely to present itself in IEA type data instead of CFTC/NYMEX type data.
 
Great topic. With all the typical political/media blame on speculators it isn't surprising that even traders get caught up in the lie.

As mentioned, you can't drive up the price without actually taking delivery. You can check the EIA storage numbers and see that there is no spike in oil storage (although there was an odd spike a few months ago when oil was around $110 - it has since sold off). The ongoing run up is purely supply and demand. The two main causes IMO are peak oil and the Fed debasing the dollar. Gee, what a surprise that the establishment prefers to blame speculators instead of telling the public, "you are headed over a cliff, oh and by the way the banking industry and Fed screwed you."
 
Yeah. lots of finger pointing at the moment. Commodities markets have had a tendency to go parabolic for many decades. My data only goes back 35 years, but lots of mega spikes on just about every commodity there is from sugar to soybeans to platinum.

The thing is, supplies are still getting snapped up at today's prices. The slow down in US consumption is offset elsewhere. As long as supply gets sucked up, kinda hard to blame the speculators.
 
if you were to sell those 1 million contracts the market doesn't have to go back to where you bought them. it could go way below or stay above

If you sell to someone at 50. And then they offer it at 60 and someone buys it from them and then sells it back to you at 70. then the last price traded was 70 and there is zero open interest and no one will take delivery.


A sells to B at 50 - A Short one - B long one
B sells to C at 60 - A Short one - C long one
C sells to A at 70 - A,B,C are all flat now and the last trade was at 70.
 
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