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why is oil going CRAZY right now?
- Thread starter jonbig04
- Start date
Quote from jonbig04:
i dont understand something.
why do futures traders/speculators set the price of oil? of an oil company drills for the oil and then send it back to the US why do the futures have an impact? im sure there is a fairly simple answer
Because most of the supply contracts are written with NYMEX and or Brent futures as a reference.
As a (watered down) example, "final price to the seller will be the price of the designated futures month ( spot or nearby or some combo ) averaged over ten (or five or fifteen or whatever) days, beginning when the barrel changes possession at the (ship, pipeline, storage tank, whatever).
The problem with the "hijack the futures" theories are several. One, the seller is only making "x" dollars from the cargo. If the "futures hijacker" gets caught long with 500 contracts during a sell off, he diminishes what he could have made otherwise. In addition, the "futures hijacker" is concerned with more than one cargo - so this operator could be caught long with 5,000 to 10,000 contracts.
At some point, the oil price can get high enough to cause "demand destruction." No one knows where that point really is - but when we hit it , oil can come off big time. Let's just say being long a ton of futures contracts could be a problem and would certainly de-optimize the profits made from the cargo (cargoes).
The second problem is simply ... "why now?"
Oil was near either side of ten bucks a bbl. in the mid -1980s and I think it was pretty low again in the late 1990s.
Maybe Mr. Landis82 can confirm or correct that oil was near or below $15 bucks a bbl. in the late 1990s.
So this begs the question - why didn't "they" just "hijack the futures" back then and keep the prices from going that low in the first place?
The answer is simple ...
Yeah, the big money is piling in long into oil futures, so we will go much higher it seems. 150 looks likely in the next few months. Demand can only fall so much, everyone has to go to work. But imo, clothing, travel industries are going to suffer in a big way. People are going to be buying gas and food and watching cable TV. The economy is going to suffer in a big way with 125+ oil. We had $3.75 gas when oil was $75, we could easily get $5 gas anytime.
Quote from offbyone:
Unfortunately, falling inventories aren't why the market is climbing. Check out the march opec meeting, inventories have been climbing. Actually demand has been slightly down in the last few months. OPEC themselves were quoted as saying there was no supply shortage, that the rise in prices are not attributed to supply but rather SPECULATION. If venezuela stops shipping oil the speculators will just buy more.
Yea my original post was sarcastic; I'm well aware inventories are not down... the whole point of my message.
it is every wednesday at 10:30AM EST...EIA report...last week said 'more than enough supply amounts' and Oil soared...should have driven the price down...I do not think it could take 2 bearish reports in a row and oil keep going up...go to www.nasdaq.com and click on economic calendar...every week it is wild..Quote from Allspread:
Link? Can't seem to find anything to read on this. Thanks.