Ruling Out Speculation in the Oil Market

Well, not quite...  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.

Comments

[oilmarket]

I have always been fascinated about how the oil market works. I'm starting to believe more and more that, in fact, it has no rules to be obeyed.

[Anna Coulling]

Moves by the CFTC to try and regulate the oil trading market and prevent the kind of speculation which has seen crude oil prices rise from $30 per barrel back towards $70+ this year took an interesting twist yesterday when it was announced that the weekly COT data would now include new details on the aggregate holdings of the big Wall Street dealers, hedge funds and other financial participants. COT data is a useful market sentiment tool but as many of the market participants both hedge and speculate it has become increasingly difficult to analyse. According to the CFTC the new format will be making its debut next Friday.