so oil in storage is at a nineteen year high, does that justify today's oil prices. btw, when you have to result to insults, that means you've probably lost
The price of oil is about 99% dependent on future expectations of supply and demand. Today's oil inventory number (which is NOT equivalent to supply), is a meaningful number for prompt month pricing, but not hugely meaningful for the entire strip. People are purposefully storing oil right now, because they expect the price of oil to increase in time. Why sell your barrel for $60 when you could sell it for $80 down the road? So this phenomenon is influencing the inventory number -- rendering the inventory number only partially meaningful. QFM (Quoted for mockery)
so speculation is driving up the price of oil right now. the reason is called speculation is because there is no end in sight to when demand will return to normal. what economic conditions are they basing these expectations on.
I'm done responding to you. You don't know the definition of 1) supply or 2) speculation. How can you think you can participate in this thread? Please just sit back and observe the others. I don't have time to bring you up to speed on everything you'd need to know to participate in this discussion.
Broadly speaking, the price of oil has tracked the fortunes of the global economy. Last year, when it looked like China and the BRIC countries were going to "decouple" and continue to grow at a torrid pace, oil skyrocketed. As the financial crisis spread and the world fell into recession, the price tanked. Now, as signs of a bottoming out of the economy are beginning to appear, the price is heading back up again.
Refman and pgabs showing their ignorance in this thread. T_J, thanks for your charity work in spending your time educating them
The reason why the economy was booming was American consumerism and access to easy credit. What is the next event that props up he market?
Don't listen to those fools...these were the same guys that were saying oil prices would hit and stay at $200....
the economy doesn't have to boom to stabilize. the economy doesn't have to grow at the pace it did to be improving from where we've been of late.
It should be closer to 40 bucks than 60. Look at 2003-2004 for reference. Considering unemployment is a lot worse and there is a global recession oil might be a dangerous play.
oh, i'm not disagreeing with respect to oil. i think it should be closer to $40 too. i was talking about the economy, generally....and when you said market i was thinking equities...not oil.
ie people speculating regarding future demand and value. Gotcha. The problem is that there is abundant evidence that supply and demand is not the only factor in oil pricing. You response is to mock anybody that raises that fact. You claim such superior knowledge. "I know this isn't true, but I won't tell you how." You sound just like John Kerry.
See the thing is that futures traders will roll the contracts over to forward months when the time comes. If they expect prices to be higher 6 months from now they will start buying the June contract now. As the June contract comes to expiration (on 5/19/09) the traders start rolling over and buying the July contract. Traders don't want to be left out of upward price movement in the current month (and gain), if they believe prices will be higher in future months. That is why they buy the current month contract even if it is expiring in two weeks Since January the crude oil markets have been in something called contango. This is when the current futures price for crude oil is below the price a few months down the line. For example, in January the price of crude oil was around $35, but at the same time the July contract for crude (at that time in January) was a whopping $15 higher at $50. This is a situation called super contango, and is rarely seen. When you are in contango and of course super contango, people start storing barrels of oil like crazy as we are seeing the results now presently. The current situation in oil prices suggest contango, but not super contango as was seen in January. (Crude oil contracts) CLM9 is at 58.39 expires on 5/19/2009 CLN9 is at 59.42 expires on 6/22/2009 CLQ9 is at 60.39 expires on 7/21/2009 CLU9 is at 61.33 expires on 8/20/2009 CLV9 is at 62.23 expires on 9/22/2009 But in general situations of contango indicate traders believe the prices in the future will be higher than in the present. The super contango since January has caused this increased level of storage we are seeing now.
speculation Taking large risks, especially with respect to trying to predict the future; gambling, in the hopes of making quick, large gains. http://www.investorwords.com/4643/speculation.html So wouldn't the entire futures market be speculators and hedgers?
From George Daleiden on Suite101: Commodity Futures Traders Hedge or Speculate Futures hedgers and speculators have different motives and reasons for trading commodity futures. A hedger actually produces, needs, consumes or uses a commodity, while a speculator does not. The farmer who grows corn, and the distiller that buys it to produce bourbon whiskey, are hedgers. Ranchers that produce and sell cattle are hedgers, as are slaughterhouses that buy and process the animals. Speculators participate in the futures market purely to make money. That’s why they’re called speculators. They have no interest in or intention of producing, consuming, using or taking delivery of any commodity. Speculators vastly outnumber hedgers. Although they are often maligned as greedy and parasitic, in truth it is speculators, not hedgers, who in risking their own money provide most of the stability and liquidity to the markets in which they participate (i.e., take positions).
