User 222770

Commodities Speculation Symptom of Larger Problem

'Politicians/authors who try to blame speculators to make oil cheaper will just make things worse.'
The Economist, Jul 2008

You point to the linkn between the volume of transaction on the futures market and the price of oil. You could not be more wrong to give that as evidence for the recent rise in oil prices. Please have a look at Nickel which has equally seen increasing amounts of volume but a near halving in price.

An important point is that neither speculators nor index funds ever buy any physical oil. They buy futures and options which they settle in a cash payment. Since no oil is ever held back for these contracts, there will be no impact on the spot price of oil.

If futures prices get insanely high, then it is likely that companies and producers might be hoarding oil, but there is no sign of that.

Someone please read Friday's Lex Column in the FT or The Economist before listening to politicians and authors who claim speculators are responsible for high oil prices.

Thank you

Please get your facts straight here. Since delivery in the futures market is mostly cash settled (most are rolled over), speculators do not buy the actual oil