Oil Speculation

Theo · Posted: Wed Oct 06, 2004 2:07 pm Post subject: Oil Speculation

I was reading this piece on Yahoo!:

http://news.yahoo.com/news?tmpl=story&cid=509&u=/ap/20041005/ap_on_bi_ge/oil_prices_48

and this quote jumped out at me:

Ed Silliere, vice president of risk management at Energy Merchant Corp. in New York, said fund managers are more worried that a major supply disruption in the Middle East, caused by terrorism or something else, would cause oil prices to skyrocket to a level that would wreak havoc in the global economy and devalue most of their investments.

It seems that fund managers are speculating (betting) that there will be a terrorist attack. So to hedge their bets they're buying up oil. Add this to the already high demand and you get the current prices. Kind of reminds me of Poindexter's Future Markets Applied to Prediction (http://www.cnn.com/2003/ALLPOLITICS/07/29/terror.market/).

So are we seeing people betting on a terrorist event here? If so, when might they decided they've lost if no terrorist event happens? After the election? Could we see a sudden drop after November 2nd?

Jack · Dark Lord Joined: Aug 11, 2004 Posts: 4957

Speculation can add volatility, which is why price moves of less than a year may not mean much. At some point, I fully expect to see a downward move in oil, followed a few months later with a move upward to new highs.

I doubt the election will have much to do with it. Stability in Iraq would reduce prices, and a recession in China and the U.S. would also put pressure on prices.

Sololeum · Posted: Sun Oct 10, 2004 4:38 pm Post subject:

When European Banks are buying physical oil and storing it what does that say about hedging in paper!!!

In Vi Et Silva

Jack · Dark Lord Joined: Aug 11, 2004 Posts: 4957