Yesterday's Crude Spike: Most Cut-and-Dry Case of Speculation Yet

Some of you may be wondering this morning why, if oil posted its largest gain ever yesterday and closed at $120/barrel sending the markets into a tailspin, crude is quoted at $107.60, down $1.81/barrel. 

Yesterday's price action was the most cut-and-dry example of speculation in the commodities markets we have seen to date. Contracts for October delivery expired yesterday, meaning anyone who was short those contracts would either have to cover their short or deliver the oil. A $25 spike was the result of hasty short covering before the market closed.

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Comments

[mangolfer:]

It's all speculation BS. Look at the price today.

2008 Sep 23 09:14 AM

[Niner:]

If you look at the charts for OIL and Dow. Why did Oil begin dropping pretty much on July 14 and the Dow bottom and begin an uptrend? Now that the SEC has restricted shorting. Oil is trending up and the Dow is trending down. Is this conicidence? Or, is it Hedge fund/ Pension fund money moving around?

It also seems that those who scream innocense the loudest are the most guilty. Speculators, you protest to loudly!

2008 Sep 23 09:18 AM

[GDS:]

Bullish on Oil my butt! Ike put the double whammy on the shorts, no crude, no delivery. This too will soon pass. You might say the shorts took it in the shorts.:)

2008 Sep 23 09:28 AM

[lcs:]

The reversal on July 14 ALSO occurred when the SEC restricted shorting. Now you say the opposite reversal is also caused by the SEC. You can't have it both ways.

2008 Sep 23 09:31 AM

[SW Richmond:]

Damned evil speculators! Send 'em to Gitmo! Sterilize their families! Kill their children! Take away their birthdays!

ANYONE TRYING TO PLACE ANY BETS AGAINST THE HOLY STOCK MARKET OR ITS HIGH PRIESTESSES AT GOLDMAN SHOULD BE ARRESTED FOR TREASON AND SUMMARILY SHOT!

2008 Sep 23 10:04 AM

[Jason Rines...:]

There is still a couple of months before elections and then a few months after that before the new guy gets in and looks at energy policy. This current crop has had it's head in it's behind so oil will likely be a safe bet. Money goes where it is best serviced to grow. If Washington wants to help the consumer and economy at large, it cannot attempt to make evereone ride bicycles and not tap into our own resources.

2008 Sep 23 10:14 AM

[gebby:]

i am buying pwe and hgt. two high yielding energy trusts. oil move yesterday shows speculators pushed oil unrealistically low.

2008 Sep 23 10:23 AM

[bds231:]

Here's what I don't get: If many of the people who bought yesterday were short with no intention of delivery, what happens to all those longs who bought their contracts with the expectation that they would actually received physical oil?

Sure, some of them would be balanced out by long speculators, but is there really a 1-to-1 match between short and long speculators (I would find that hard to believe)? Or are there people out there trying to use the futures market the old-fashioned way -- to lock in the price for a commodity they must buy -- getting whipped around by heavy speculation?

2008 Sep 23 11:29 AM

[User 263522:]

The sentinel - being from the future and having all the knowledge of the 'past' 21st century - would no doubt tell you to keep all your money in Google Bucks in the Google Bank.... All except the $10 you place on three different Clinton's becoming President of the United States of North America in the interim at half a billion to one odds.

2008 Sep 23 01:43 PM