Is oil in the equivalent of a short squeeze?

diemos · Tar Sands Joined: Sep 23, 2005 Posts: 67

There are a lot of businesses that buy oil in advance a couple of years out to lock in their costs. Southwest airlines is a notable example. Their counterparties are on the hook to pay whatever is required to get them their contracted for oil at delivery time.

Could oil be high not because speculators are buying contracts today but because they sold contracts two years ago and now the oil just isn't availableon the spot market to fulfill those contracts?

desultorypawn · Tar Sands Joined: Jun 04, 2008 Posts: 41

Could definitely be.
People promised to sell oil to someone at a certain price, it's getting above that price, why not buy has much as you owe and minimize your loss by riding the stock up until you have to pay it.